What changed
RBI lowered the minimum net worth threshold for scheduled/licensed State Cooperative Banks and licensed District Central Cooperative Banks to undertake insurance business as corporate agents without risk participation from ₹100 crore to ₹50 crore. The net worth is measured as per Section 11 of the Banking Regulation Act, 1949, based on the latest NABARD Inspection Report. All other eligibility norms and conditions from the earlier circular remain in force.
What it means for you
More cooperative banks can now diversify into fee-based insurance distribution, boosting non-interest income. Banks with net worth between ₹50 crore and ₹100 crore that were earlier barred can now apply. However, prior RBI approval is mandatory, and banks cannot take insurance risk on their books.
What you must do
- Check your bank's net worth as per the latest NABARD Inspection Report to see if it meets the new ₹50 crore threshold.
- If eligible, prepare a board-approved proposal to enter insurance business as a corporate agent without risk participation.
- Apply to your respective RBI Regional Office for prior permission before undertaking any insurance activity.
- Ensure compliance with all other terms and conditions from the November 18, 2004 circular.
Who it affects
Scheduled or Licensed State Cooperative Banks, Licensed District Central Cooperative Banks
What is the new net worth requirement for cooperative banks to enter insurance business?
The minimum net worth has been reduced from ₹100 crore to ₹50 crore, as per the latest NABARD Inspection Report and defined under Section 11 of the Banking Regulation Act, 1949.
Can cooperative banks take insurance risk under this circular?
No. This circular allows only corporate agency without risk participation. Banks cannot underwrite insurance policies or assume any insurance risk.
Do banks still need RBI approval before starting insurance business?
Yes. Prior permission from the Reserve Bank of India is mandatory. No SCB or DCCB should undertake insurance business without obtaining such approval.