Govt to infuse ₹2,500 crore in three state-run insurance firms1 min read . Updated: 12 Feb 2020, 03:43 PM IST
- The infusion is a step toward a planned merger of the three general insurance companies
- As much as ₹6,950 crore will be infused in the three companies in the next financial year
NEW DELHI : The Cabinet on Wednesday approved the infusion of ₹2,500 crore into three public-sector general insurance companies--Oriental Insurance Co, National Insurance Co and United India Insurance Co.
“As you know the government has infused ₹3 lakh crore into public-sector banks in the past three years. Similarly, we will start recapitalisation of general insurance companies in tranches…The government will infuse more capital as and when required," Union minister Prakash Javadekar said in a media briefing.
The capital infusion could be a step towards the merger of the three general insurance companies. However, a proposal for the merger is yet to be taken up for approval.
If merged, the operational efficiency and solvency ratio of the three entities is expected to increase. The profitability of these companies may also improve.
“The government is infusing capital into these (insurance) companies so that the solvency ratio becomes acceptable and it fulfils the criteria of IRDA (Insurance Regulatory Development Authority)," Javadekar said.
In financial year 2018-19, former finance minister Arun Jaitley had proposed a merger of the three public-sector general insurance companies and list the merged entity on domestic bourses.
The Centre has already infused ₹2,500 crore into the three state-owned insurance companies via supplementary demands for grant earlier this year. Besides, ₹6,950 crore will be infused in these three companies next year, according to the 2020-21 Budget document.