Mumbai: Reserve Bank of India (RBI) has said that banks need not obtain its prior approval for engaging in insurance agency business or referral arrangement without any risk participation, subject to certain conditions.

The banks should comply with the Insurance Regulatory Development Authority (IRDA) regulations for acting as composite corporate agent or referral arrangement with insurance companies, RBI said in a notification.

However, banks intending to set up insurance joint ventures with equity contribution on risk participation basis or making investments in the insurance companies for providing infrastructure and services support, would continue to obtain the prior approval of RBI.

The risks, if any, involved in insurance agency/referral arrangement should not get transferred to the business of the bank, it added.

The Apex bank said banks should not adopt any restrictive practice of forcing its customers to go in only for a particular insurance company in respect of assets financed by the bank and customers should be allowed to exercise their own choice.

RBI stated that those banking entities desirous of entering into referral arrangement should also enter into an agreement with the insurance company concerned for allowing use of its premises and making use of existing infrastructure of the bank.

PTI