The largest lender, State Bank of India, is all set to undertake the general insurance sector. The bank is going to finalize its terms of joint venture with Insurance Australia Group (IAG) by the next few weeks.

SBI's Chairman O P Bhatt said, "It (general insurance joint venture) is at the final stages and we are seeking RBI approval."

Once a mutual agreement is reached, the new company is expected to start its operations in next three to six months after the approval of Insurance Regulatory and Development Authority (IRDA).

An agreement to form a new company in insurance sector was signed between both parties- SBI and IAG- in the month of May this year. In this venture, State Bank of India will hold a majority stake of 74% and Insurance Australia Group will control the rest (26%).

The banking major will consult Ernst & Young for its general insurance foray. SBI's entry into this sector is likely to pose a threat to players who are already seated in the sector. In public sector the challenge hold for players like United India Insurance, New India Assurance, Oriental Insurance and National Insurance who hold majority of the market in the business. While on the private front over a dozen players need to be alert.

SBI has already been operational in the life insurance business through its subsidiary SBI Life. Now it plans to enter the non-life insurance business with a huge network of about 10,000 branches.

SBI Life Insurance is a joint venture between the State Bank of India and BNP Paribas Assurance. SBI Life Insurance is registered with an authorized capital of Rs 2000 crores and a Paid-up capital of Rs 1000 Crores.

Insurance Australia Group Limited (IAG) is an international general insurance group, with operations in Australia, New Zealand, the United Kingdom and Asia. IAG's businesses underwrite around $7.8 billion of premium per annum and employ around 15,000 people.

The company which has a strong financial strength in insurance is eyeing its Indian joint venture to expand its business in Asia.

State Bank of India has hostile plans to enlarge its business on various fronts and it has recently received approval from the Foreign Investment Promotion Board (FIPB) for its proposed joint venture with French banking major, Societe Generale's (SocGen). This venture is signed to operate custodial and depository services in India.