After scrapping their merger proposal,the government on Friday has amended the the General Insurance Business (Nationalisation) Act,1972, so that authorised capital of three PSU general insurers- Oriental Insurance Company(OIC),National Insurance Company(NIC) and United India Insurance(UII)-,can be raised to improve their solvency ratios to facilitate the business expansion and profitability of these companies.
The government has also already gezetified the amendments on Friday and it is expected that these companies will get capital infusion of Rs 3,475 crore soon.
Earlier while calling off the two -year old merger proposal among three PSU General Insurers,OIC, NIC and UII, the union cabinet had also approved to increase in authorised share capital of NIC to Rs.7,500 croref from Rs 2600 crore and that of UIIC ( Rs 200 crore) and OlC (Rs 250 crore ) to Rs 5,000 crore respectively.
The cabinet also had approved capital infusion of Rs12,450 crore for the three PSU general insurers that included Rs 2,500 crore already infused in these three companies in 2019-20,
The ministry of finance(MoF) had clarified that out of Rs 10,00 croreof fresh capital,Rs.3,475 crore will be released immediately;while the balance Rs,6475 crore will be infused later.
The capital infusion of Rs.3,475 crore will be allocated to three PSU general insurers as the first tranche in the current financial year and the. balance amount will be released in one or more tranches, said the MoF note..
The Centre had already infused ₹2,500 crore into the three state-owned insurance companies via supplementary demands for grant earlier this year out of which National Insurance Company had receivd Rs 2400 crore and UII and OIC had got Rs 50 crore each.
The capital infusion will enable the three PSU general insurers to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes and enhance the capacity to raise resources and improved risk management.The way forward for these companies will be to ensure optimum utilisation of the capital being provided and the Government has issued guidelines in the form of Key Performance Indicator (KPIs) aimed at bringing business efficiency and profitable growth, said the MoF note..
“The process of merger,which has been hanging fire for the last two years,has been ceased so far in view of the current scenario and instead,the focus shall be on their profitable growth,'' said a note by the ministry of finance(MoF).