Finally, the government may be yielding and the upcoming Budget may have a  provision for Rs 4,000-crore- Rs 4500 crore capital infusion for the three solvency deficit public sector general insurance companies, National Insurance Company(NIC), Oriental Insurance Company(OIC) and United India Insurance Company(UIIC), to shore up their capital.The government has already announced that these three ailing companies would be merged. 

The Budget 2019-20 is likely to be presented on February 1 by the interim Finance Minister Piyush Goyal. 


According to sources, the Department of Financial Services sought Rs 4,000 crore in the Budget for fund infusion in three insurance companies.


According to sources, the Department of Financial Services sought Rs 4,000 crore in the Budget for fund infusion in three ailing general insurance companies.Depending on the capital that Budget provides, individual allocation would be made, sources added. This capital is required to strengthen their financial health.


Though,the three companies have demanded much larger capital infusion, National Insurance Company itself wants a capital infusion of Rs 5,000 crore over a period of three years– the government may be settling for a much smaller amount and whether it is one-time initiative or like banking sector, it will be one of the tranches is yet to be known.


“We will be happy if we get just Rs 1000 crore now. This will help us growing our business properly,'' said a senior official of one of te companies. 


IRDAI chairman SC Khuntia and member, Finance & Investment,Pravin Kutumbe had recently visited New Delhi to prevail upon the ministry of finance on the issue of capital infusion. .

“Khuntia has been following vigourously with the reluctant MoF to undertake capital infusion programme for the three companies which has been surviving on a lot of regulatory forbearance and other special supports. Finally, the MoF may be willing. to give some capital to these companies'' said MoF sources 


The government had realised that without strengthening these companies by which they can improve their solvency,just merging them would not produce the desired results.In fact, E&Y,which has been chosen to prepare the merger strategies of three companies, would begin its assignment from Feb 1.


Without mandatory solvency ratio of 1.5 per cent, all these companies have not been able to grow their bisiness and simultaneously seem to have entered into a vicious circle as they have been increasingly recording net losses, underwriting losses, deteriorating combined ratios, negative growth and loss of market shares.


Though the situtaion has happened almost two years back, the government seems to have woken up now by agreeing for capital infusion in these companies.   .  

Finance Minister Arun Jaitley in the Budget speech fr 2018-19 had announced that the three companies would be merged into a single insurance entity.