In the Union Budget of 2018-19, the government had announced a possible merger of three Public Sector General Insurance Companies (PSGICs), namely National Insurance Company, United India Insurance Company, and Oriental Insurance Company then.
However, in the wake of the Covid-19 pandemic and uncertainty thus witnessed, the Finance Ministry stated that the process of the merger has been ceased so far and the government will instead be focusing on their solvency and profitable growth, through Capital infusion.
How much capital will be infused now and later?
The Union Cabinet has approved to infuse capital into three PSGICs for an overall value of Rs.12,450 crore, to include Rs. 2,500 crore infused in FY 2019-20. Capital worth Rs. 3,475 crore will be infused immediately, and the balance of Rs.6,475 crore will be infused later in tranches.
The capital infusion of Rs. 3,475 Crore will be allocated to three PSGICs viz. OlCL, NICL, and UIICL as the first tranche in the current financial year, and the balance amount will be released in one or more tranches later.
How will this help the three PSGICs?
This capital infusion will enable the three PSGICs to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes, and enhance their capacity to raise resources while improving risk management.
To give effect to the capital infusion, the cabinet has also approved for an increase in the authorized share capital of NICL to Rs. 7,500 crore and that of UIICL and OlCL to Rs 5,000 crore respectively.
To ensure that the capital infused is optimally utilized, the Government of India has issued guidelines in the form of KPIs aimed at bringing business efficiency and profitable growth.