Life Insurance Corporation of India (LIC), the largest insurer of the country is also likely to join the race for obtaining a bank license.

Sources revealed that LIC had wanted to float a bank since a long time so as to manage the large premium collection and claim settlement work.

Following the announcement made in the union budget 2010-11 that NBFCs and private sector players may obtain bank licenses, many NBFCs are harboring ambitions of turning into banks.

LIC is the latest name added in the race which includes players like Aditya Birla Financial Services, Reliance Capital, Bajaj Finserv Srei, Shriram Transport, Indiabulls and IFCI.

This year the insurer is expected to collect a sum as large as Rs. 1, 76,000 crore as premium income. The company settles around 15 million claims annually. It also has to make regular payments for the annuities business.

LIC is a stake holder in many banks and after receiving a clearance from the insurance regulator, IRDA, it went in to hold 26 per cent in state-owned Corporation Bank.

It further holds 10.53% stake in SBI, the largest lender in the country, 10.35 % in the largest private sector lender, ICICI Bank and 7.02% in HDFC Bank.

It has been one of the promoters of Axis Bank and has also tried to take control of it in the past. However, its efforts were not fruitful as Axis Bank was a private sector lender while LIC is a public sector entity.

LIC Chairman T S Vijayan said, "Corporation Bank is a public sector bank and it is a strategic investment. We are one of the promoters in Axis Bank. But starting a bank is an entirely different ball-game. We are waiting for the guidelines to come and will take a call based on the regulations."

In order to go ahead towards obtaining a banking license, LIC has to obtain permission from IRDA.

Further, the insurer will need more capital to proceed towards its banking foray.