New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi, has given its in-principle approval for capital infusion into three public sector general insurance companies — Oriental Insurance Company Limited (OICL), National Insurance Company Limited (NICL) and United India Insurance Company Limited (UIICL).
In view of the above, the Cabinet has allowed the immediate release of Rs 2,500 crore in the light of the critical financial position and breach of regulatory solvency requirements of the three general insurance companies, OICL, NICL and UIICL.
"As you know, the government has infused Rs 3 lakh crore into public-sector banks in the past three years. Similarly, we will start recapitalisation of GICs in tranches. The government will infuse more capital as and when required," Union Minister Prakash Javadekar told the media after the Cabinet meeting.
"The government is infusing capital into these companies so that the solvency ratio becomes acceptable and it fulfils the criteria of IRDA," he further said.
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This is being seen as a step towards the merger of these three state-run insurance companies, as had been announced by former Finance Minister Arun Jaitley in the 2018-19 Budget.
In his Budget for 2018-19, Jaitley had proposed merging OICL, NICL and UIICL, and list the merged entity on domestic stock exchanges. However, the poor financial health of these companies had delayed the merger process by two years.
Minister of State for Finance Anurag Singh Thakur had said that the government will extend financial support of Rs 2,500 crore to insurers during the current financial year. A corpus of Rs 6,950 crore has already been announced for them in the Union Budget 2020-21 presented by Finance Minister Nirmala Sitharaman earlier in February.