Corp Bank, LIC script new business formula

MARCH 19, 2007: Corporation Bank and one of its largest shareholders, Life insurance Corporation, have identified reverse mortgage and financial inclusion as new areas of business they would jointly work on. While Corporation Bank will provide reverse mortgage to its customers, LIC will provide actuarial support in calculating the monthly equated instalment that the customer would receive in the scheme.

Under the reverse mortgage scheme, senior citizens can considering earning a monthly income by pledging their home with a housing finance company (HFC) or a bank even while they continues to occupy the house for lifetime. Under its annuity schemes, LIC offers policyholders regular income against a lumpsum payment. The pricing of the annuity is based on life expectancy and interest rates in the market. In a reverse mortgage scheme instead of an upfront payment the retiree pledges his home. National Housing Bank is expected to come out with guidelines for lenders who plan to offer reverse mortgage products.

LIC holds about 26% equity stake in Corporation Bank and this alliance dates back to 2001 when it first acquired shares in the company through the government. Besides, reverse mortgage, LIC and Corporation Bank will jointly initiate steps towards financial inclusion. Corporation Bank has began a pilot project in Goa wherein the bank has provided smart cards to the customers.

Smart card allows the customers to deposit and withdraw money through the card. Mr Sambamurthy said that going forward customer could pay LIC premium through the smart card. He said that this will also reduce the IT cost which both the entities would have otherwise incurred individually. LIC and Corporation Bank have been jointly providing services in the areas of bancassurance, mortgage insurance and group insurance. LIC also utilising Corporation Bank?s cash management services for LIC premium collection.

 

Source: Economic Times