New Delhi: Public sector banks, Canara Bank and Oriental Bank of Commerce (OBC), have decided to float a life insurance venture along with the insurance arm of HSBC, Insurance (Asia Pacific) Holdings Ltd.

The three-way insurance joint venture would have Canara Bank as the lead partner with a 51-per cent stake in the proposed insurance joint venture. OBC would hold 23 per cent and HSBC Insurance the remaining 26 per cent, the maximum permissible limit for foreign partners at present.

Under the agreement, HSBC Insurance will provide management services, and the tie-up will have access to a nationwide customer base of more than 40 million.

The new life insurance company will have a paid up capital of Rs325 crore of which HSBC would contribute Rs170 crore, which includes premium for accessing the vast branch network of public sector banks.

Life premium incomes in India have grown at an annual 21 per cent since the market was opened to private players in 1999, and exceeded $20 billion in 2005. And, with an insurance penetration rate of 2.5 per cent in 2005, the Indian market has tremendous long term growth potential.

Canara Bank will invest Rs102 crore, while OBC will contribute Rs46 crore. The new venture is expected to get off the ground by the end of this fiscal.