The Insurance Regulatory and Development Authority of India (IRDAI) has cautioned SBI Life Insurance
’s joint venture partner BNP Paribas Cardif (Cardif) in a stake-sale matter. The insurance regulator has said that the sale (done in March) of 5.069 percent stake of Cardif in SBI Life was done without prior approval.
The IRDAI has now given post-facto approval to the stake sale process conducted in FY19. As per Indian insurance laws, any major share/stake sale in an insurance company needs prior nod by the regulator.
The regulator said that SBI Life had informed the IRDAI about the stake sale by Cardif. However, the IRDAI said that the sale was made without seeking its prior approval.
After this, the IRDAI sought clarification from SBI Life and Cardif for not seeking prior approval for the said transaction. A show-cause notice was sent to Cardif in June.
During the personal hearing, it was brought to the notice of the representatives of Cardif that SBI Life had advised Cardif to obtain approval of the IRDAI prior to the transaction. Further, it also came to light that SBI Life further requested Cardif to provide a copy of the approval received from IRDAI in this regard.
“In spite of the advice from SBI Life, Cardif carried out the transaction without seeking prior approval of IRDAI in violation of the provisions of section 6A(4)(b)(iii) of the Act,” said the IRDAI order.
However, Cardif said that prior approval was not sought as their legal counsel advised them that prior approval was required by the acquirer and not the transferor. The representatives of Cardif further submitted that, on the advice of their counsel, they genuinely believed that the prior approval of the IRDAI was not required and hence, a prior approval was not sought.
Further, Cardif further requested for grant of post-facto approval of the IRDAI for the above-said sale of shares.
“Since compliance with the law was solely their responsibility, Cardif is hereby advised to exercise due caution to ensure adherence to all legal and regulatory stipulations as applicable in the future,” said the IRDAI.