The Reserve Bank of India has asked Reliance Capital, the non-banking finance arm of Anil Dhirubhai Ambani Enterprises, to furnish the details of its plan to acquire 100 per cent stake in Chennai-based AMP Sanmar Life Insurance Company.
The banking sector regulator is peeved at the fact that Reliance Capital did not seek its clearance before announcing the deal.
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"Reliance Capital is an NBFC and it must get RBI's permission to announce any such deal. The RBI is the regulator for the NBFC sector. It has written to the company seeking information on the deal but has not got any response yet," a source in the RBI told Business Standard on Thursday.
The RBI has also written to the Insurance Regulatory and Development Authority on this and soon, both the regulators will meet to discuss the issue.
A Reliance Capital executive said, "We have categorically mentioned that the proposed acquisition is subject to regulatory approvals. We are talking to IRDA on this." IRDA Chairman CS Rao said both Reliance and AMP Sanmar had made presentations to the regulator.
"We will conduct a due-diligence exercise on the acquirer. We need to know which entity is acquiring the life insurance company as Reliance Life does not have a licence at the moment."
Reliance Life Insurance Company Ltd, a subsidiary of Reliance Capital, and the shareholders of AMP Sanmar Life Insurance Company, on Sunday, signed an agreement for the sale of 100 per cent equity in the insurance firm.
Even though the deal is "subject to regulatory approvals", the banking regulator feels that without its "no-objection", no entity can enter into such an agreement.
Incidentally, Reliance Capital had recently applied to the IRDA for the renewal of its life insurance licence under Reliance Life Insurance Company. It had received the IRDA R2 clearance in early 2001.
AMP Sanmar Life, a 26:74 joint venture between the Australian AMP group and Chennai-based Sanmar, has a capital base of Rs 217.5 crore (Rs 2.17 billion). It has over 90 offices, a 9,000 strong agency force and an employee base of over 850. It reported a premium income of Rs 105 crore (Rs 1.05 billion) in 2004-05.
The acquisition, the cost of which is not known, will give Reliance Capital an immediate foothold in the growing life insurance business and pave the way for converting the company into a full-scale financial power house.
Last year, a foreign bank reportedly struck a deal to buy stake in an Indian private bank without the prior permission of the RBI. The banking sector regulator, after giving its "in-principle" approval to the deal, took close to 10 months to formally clear it. Subsequently, it also asked the foreign bank to bring down its stake, as it was not in conformity with the RBI policy.
