Friday, May 14, 2010

Beggar "demands" more money

RBI recommended that banks not enter the already competitive life insurance business as the break even time is high and it is a capital intensive business. Then there was news that LIC may ask for a banking license. The chairman in an interview said it is a decision of the board and he cant confirm or deny it. LIC has a listed subsidiary called the LIC housing finance. The rumour news went that LIC housing finance went and RBI license to open a bank. The funny part is that LIC housing finance is a small company and goes asking(begging) for money from the parent LIC every few years once it has completed disbursing its loans and wants to grow further(Capital Adequacy Ratio concept). What could be the height of the competition? Both parent and subsidiary opening different banks and fight it out... Fortunately, I am sure the LIC board is smarter than this rumour :)

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