The Life Insurance Corporation of India is shopping for strategic stakes in commercial banks to put bancassurance to better use.

Buoyed by the success of its investment in Corporation Bank -- the bank has mopped up over Rs 3,500 crore (Rs 35 billion) in first-insurance premium for the insurer in April-June 2003 -- LIC is likely to take strategic stakes in other banks as well.

LIC would make an additional investment of between 15 per cent and 20 per cent in select banks, including private ones, LIC chairman S B Mathur told Business Standard.

LIC currently has an average 5 per cent stake in various banks, but these are portfolio holdings.

Despite these holdings, several banks have tied up with private insurance companies to hawk their products. LIC now wants exclusive tie-ups to push its policies.

Bancassurance is a major distribution channel for private insurers, which do not have anything close to LIC's 1 million sales agents.

Mathur said LIC had targeted 5 per cent of its first-premium income through bancassurance. "If a substantial portion of this comes from Corporation Bank, we will take strategic stakes in more banks," Mathur said.

LIC has a 27.02 per cent stake in Corporation Bank, for which it had to take permission from the Insurance Regulatory and Development Authority. Insurance companies are allowed a maximum of 20 per cent holding in any entity.

LIC is also capitalising on Corporation Bank's cash management services to improve its cash flow, treasury operations and distribution.

Incidentally, LIC has of late been a net seller in the capital market, capitalising on the rising price of bank stocks.

According to industry sources, it has gained Rs 1,000 crore (Rs 10 billion) in the current stock market rally.