State-owned Punjab National Bank on Wednesday said it has decided not to divest its stake in Canara HSBC Life Insurance, which came to the lender's fold after the merger of Oriental Bank of Commerce (OBC) with PNB.

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The board of directors in its meeting held on February 28, 2023 has accorded approval for withdrawal of the process for divestment of bank's stake in Canara HSBC Life Insurance Co Ltd, PNB said in a regulatory filing.

"The bank shall hold its stake in the company as an investor, subject to regulatory approvals," it said.

The change in PNB stance is on account of recent IRDAI notification dated December 5, 2022 on IRDAI (Registration of Indian Insurance Companies) Regulations, 2022 which permit an entity to hold up to 25 per cent stake in another insurer as investor not as promoter.

Already, PNB is a promoter of PNB Metlife Insurance with highest stake of 30 per cent.

Founded in 2001, PNB Metlife's other shareholders include US-based Metlife with 26 per cent, Elpro (21 per cent) and M Pallonji & Company (18 per cent).

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As per the regulation, an investor may invest in any number of insurers provided that the investment does not exceed 10 per cent of the paid-up capital of the respective insurers.

"In case of investment of more than 10 per cent but less than 25 per cent of paid-up capital of the insurers, investment by the investor shall be restricted to not more than two insurers in each class of insurance business," it said.

In another case, the merger involving Union Bank of India, Andhra Bank and Corporation Bank, Andhra Bank holds 30 per cent stake in IndiaFirst Life Insurance whereas Union Bank holds 23 per cent stake in Star Union Dai-ichi Life Insurance.

In this case again the merged entity led by Union Bank of India will have more than 10 per cent stake in two life insurance companies.

In the biggest consolidation exercise in the banking space, the government in August 2019 had announced four major mergers of public sector banks, bringing down their total number to 12 from 27 in 2017, a move aimed at making state-owned lenders global sized banks.

United Bank of India and Oriental Bank of Commerce have been merged with Punjab National Bank; Syndicate Bank with Canara Bank; Allahabad Bank amalgamated with Indian Bank; and Andhra Bank and Corporation Bank were consolidated with Union Bank of India.

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