New Delhi, March 5 (IANS) Canara Bank, Oriental Bank of Commerce (OBC), and HSBC Insurance (Asia-Pacific) Holdings Limited Monday signed a non-binding Memorandum of Understanding to jointly establish a life insurance company in India.

"The new company will have exclusive access to the customer bases of both the state-owned banks Canara Bank and OBC, and of HSBC in India," a joint statement said.

This comprises more than 40 million people and a nationwide network of 3,600 branches.

"This formidable distribution capability will be used by the company to become a significant player in the country's rapidly expanding life insurance industry," the statement.

Under the proposed agreement, Canara Bank will take a 51 percent stake in the new company, HSBC a 26 percent interest and OBC the remaining 23 percent.

The new company will be capitalised at Rs.3.2 billion, of which HSBC will contribute Rs.1.7 million, Canara Bank Rs.1 million and OBC Rs.460 million.

"Under the terms of the agreement, HSBC will provide a range of management services, which may include providing executives for senior roles," the statement said.

Life insurance premiums in India grew at an annual rate of 21 percent in the six years following the opening of the market to private players in 1999, exceeding $20 billion in 2005.

From April to November 2006, new life insurance premiums grew by 155 percent, according to the business figures released by India's Insurance Regulatory and Development Authority.

"However, with a penetration rate of only 2.5 percent in 2005, India's nascent life insurance market has considerable long-term growth potential," the statement said.