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IFC eyes role in Indian insurance, banks

HYDERABAD, India: The International Finance Corporation (IFC) is interested in picking up stakes in private Indian insurance companies and is also eyeing a role in the privatisation of state-run banks, a top official of the corporation said late on Friday.

Peter.L. Woicke, executive vice-president, told Reuters in an interview that although the IFC was looking at minor stakes in these companies, its participation in the privatisation process would induce other foreigners to pick up stakes.

"We are quite excited about the potential for privatisation here. We also believe that some foreign participation could provide the Indian market with lot of technology...risk management technology. Our participation will induce other foreigners," he said.

India's parliament recently dismantled decades of state monopoly in the insurance sector by passing legislation that opens the sector to private participation and seeks to allow foreign firms to own up to 26 percent in private insurance firms.

The country's insurance sector regulator, the Insurance Regulatory and Development Authority, expects to start issuing licenses to private insurance firms by the year-end.

Woicke, who is also managing director of the World Bank, said the IFC was in talks with a few potential entrants for stakes.

The IFC's current exposure to India is around $650 million and is likely to increase by another $250 million by June 2000, he said.

MAY PARTICIPATE IN PRIVATISATION OF BANKS

Woicke said the IFC would also consider participating in the privatisation of state-run banks by picking up small stakes in some banks.

The Indian government is expected to spell out steps towards reducing its stake in the country's 27 state-run banks in its forthcoming budget for the year 2000/2001 (April-March).

"We would consider taking participation. Not as a huge provider of capital, but more as a catalyst for other investors to come in," Woicke said.

"There is a view that if the World Bank or the IFC is involved, other shareholders attempt to behave more rationally than without it."

The IFC holds a nearly 10 percent stake in one Indian private bank, the Global Trust Bank.

Woicke however said the IFC would have a problem if the government decided to retain a large stake.

"The RBI (Reserve Bank of India) and the government have the right for their policy, but if we would be told that the government wants to retain a major stake and control, then we cannot participate," he said.-Reuters