The Life Insurance Corporation of India expects to decide soon whether to enter the credit card business in the next five weeks.

On the sidelines of launching its new plan, Amulya Jeevan, A K Shukla, chairman, LIC [Get Quote], said that consulting firm KPMG has been roped in to provide consultation on entering the credit card business for Rs 1.58 crore (Rs 15.8 million). 

The mandate given to KPMG is to find out whether foraying into the credit card business will help its policy holders, can its agents use their time in a better way by selling credit cards and also doing so, would enhance its brand reputation.

The consultation will be in three phases - the first phase with a time frame of five weeks will advice LIC as to whether it should enter the credit card business.

The second phase, would find out that if it enters, what should be the business model, should it be undertaken as a stand-alone venture or a joint venture. The third and the final phase would find out the course of action to be taken if it goes in for a joint venture business model suitable for LIC.

The objective of setting up a credit card business is that LIC can leverage its data on policy holders credit worthiness as well as competitively price the card.

Talking on the removal of the sovereign guarantee, Shukla said that the government would be the final deciding authority on it. In any case an amendment of the Life Insurance Act would be required for such an issue, he added.

Shukla said, "We are comfortable either way" and that removal of the sovereign guarantee would not impinge upon LIC. He also pointed out that an insurance company's strength should be based on the promptness of claims settled by it. LIC had settled over one crore claims, worth Rs 22 crore last year.

He was positive that the company's life fund is expected to cross Rs 5 lakh crore by March 2006. The new plan, Amulya Jeevan is a term assurance plan with a minimum sum assured of Rs 25 lakh. The minimum policy term will be five years.