"To enable banks to leverage their branch network for increasing insurance penetration, it has been decided to permit banks to undertake insurance broking business departmentally," the Reserve Bank said in a notification.

Currently, under the bancassurance model, a bank is allowed to become a corporate agent of a life and general insurers each, while under the broking business it will be able to sell products of multiple companies.

Finance Minister P Chidambaram had announced in the budget that banks would be permitted to act as insurance brokers and insurance regulator Irda had come up with regulations in this regard.

The RBI wants banks to disclose details of remuneration in any form from the broking business to the customers and report fees/brokerage in the `notes to accounts' in their balance-sheets.

There should be dedicated and specialised staff for the insurance broking business, which should not be given any incentive for getting business for their performance, the guidelines suggest.

"The staff of the bank is also not permitted to receive any incentive (cash or non-cash) directly from the insurance company. The above must be ensured while formulating the incentive structure of staff," it added.

The public has been given time till December 31 for comments and feedback on the draft guidelines issued on Friday. The draft guidelines require every bank to have a board-approved policy for the business and also avoid conflict of interest by not entering into separate agreements with a corporate agency or for referrals.

Every bank wanting to have an insurance brokerage has to seek a "specific prior approval" of the RBI, it adds.

The RBI has suggested the bank's net worth should be over Rs 500 crore, it should have a capital adequacy of over 10 percent and net non-performing assets under 3 percent, and should have reported profit for the last three years.


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