Sitharaman may announce the merger of 3 PSU gen insurers in Budget 2020
``Though, the roadmap for the merger of the three companies are yet to be made public by the ministry of finance(MoF), it seems, it will be announced in the next week Budget. The actual process of merger may take one year after the Budgetary announcement on Feb 1,’’ said MoF sources adding that the way, MoF sought approvals of the boards of three companies hurriedly, indicate some major announcement about the merger in the Budget 2020.
After seeking the approvals of the boards of three PSU general insurance companies –United India Insurance(UII),Oriental Insurance Company)OIC) and National Insurance Company(NIC)-whose merger into one company was announced by former finance minister Arun Jaitley while presenting the Buget 2018-19- it is now expected that union finance minister Nirmala Sitharaman will announce the plans for execution of final merger, of these companies,called as `amalgamation', from Apr 1, in her forthcoming Budget 2020-21,to be presented on Feb 1.
Sitharaman also likely to announce some fund infusion for the merged entity after laying down the road map for the `amalgamation' of the three companies from Apr 1 , that have been demanding over Rs 12,000 cr of capital infusion to reach the mandatory solvency ratio of 1.5 per cent.
``Though, the roadmap for the `amalgamation' of the three companies are yet to be made public by the ministry of finance(MoF), it seems, it will be announced in the next week Budget.The actual process of merger may take one year after the Budgetary announcement on Feb 1,’’ said MoF sources adding that the way, MoF sought approvals of the boards of three companies hurriedly, indicate some major announcements about the pending mega merger in the Budget 2020.
The actual merger plans of three PSU general insurance companies will follow the same pattern as the amalgamation of the 10 PSU banks which are being given one year -beginning Apr 2020- for the actual intergration though the announcement was made a few months back.
``Whether there will be one CMD for the merged entity immediately, is yet to be seen,'' said industry sources.
In a short notice, the MoF had asked boards of the three companies to meet on 17th Jan and pass necessary resolutions on the merger proposal. After the approvals by the three general insurance companies,the `amalgamation' proposal will be approved by the Union Cabinet.
Ernst & Young(E&Y) has already been appointed as the consultant to devise strategies for the implementation of the merger.
The most difficult part of the merger would be the integration of the IT system as all the three companies currently have different IT system.
The government also plans come out with an attractive VRS scheme for around 45,000 employees of three companies and would list the merged entity on stock exchanges at the earliest.