Insurance and Banking are coexisting financial institution while complementing and supplementing each other. The Insurance Regulatory and Development Authority (IRDA) Act, 1999 have created more opportunities to them for expansion of their markets. They can serve the society in a very effective manner. Banking institutions have got the opportunities to enter in insurance business while insurance institutions have already under the autonomy of starting their banking business. Many non-banking institutions have been opened, acquired funds and dissolved with public money at their stakes. Since they were totally in the hands of private persons, the Government control became ineffective. Banking institutions in India are mainly under the control of Reserve Bank of India. People need insurance but they prefer investment over risk coverage although latter is more important.Indian mentally for insurance is very bleak people do not feel need of insurance although they have dire necessity for that. Insurance institutions in India have considered forced insurance. The voluntary purchasing of insurance policies is rare phenomena. They prefer to go to bank offices rather than going to insurance for getting risk coverage. The insurance institutions procure the business through their agents who are the main link between the people and the company. Agent’s attitude and environment may work against the free will environment of insurance.
The IRDA, Act is expected to mobiles insurance coverage and resources for investment in the economy. The government has assured that there would not be any disinvestment in the LIC, GIC and their subsidiaries. Insurance Act, 1938, has not been sufficient to regulate the insurance business in India. Foreign companies would not be allowed to hike their equity in the country through their Indian subsidiaries. It has opened a great opportunities for the banking and insurance institutions. They can perform both the functions.
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