ULIP ruling will impact corpus of banks present in insurance: Karvy Stock Broking Ltd

Ambareesh Baliga, VP, Karvy Stock Broking Ltd, in a chat with ET Now talks about ULIPS.

Do you buy ULIPs?

Yes, I have bought long term back just to do a favour to the insurance agent but I don’t believe in ULIPs.

Do you think regulatory pressure is also one reason which is contributing to some banks going down today and would that be a big negative because people have talked about this space fairly high especially a few banking stocks?

Those ones which have insurance company had two major benefits. One was clearly the corpus was growing exponentially. Especially in the last two-three years if you see the corpus was growing exponentially and especially with the new ULIP policies the sort of fees they were earning in the first two years was phenomenal. Now with this latest ruling - and in case it stays that way - I think they would clearly take a hit on the corpus.

Secondly, the fees would clearly go down quite a lot. We have seen that happening for the mutual funds and for the insurance companies from nearly 30%-40% sort of fees going down to say 1.5%-2%. It’s a major cut. So I think this is clearly playing out.