Indian Economy News

Cabinet approves capital infusion for the three Public Sector General Insurance Companies - Oriental Insurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited

The Union Cabinet chaired by the Prime Minister; Mr Narendra Modi has approved the capital infusion for an overall value of Rs 12,450 crore (US$ 1.77 billion); (including Rs 2,500 crore (US$ 354.66 million) infused in FY20) in the three Public Sector General Insurance Companies (PSGICs) namely Oriental Insurance Company Limited (OlCL), National Insurance Company Limited (NICL) and United India Insurance Company Limited (UIICL) but of which Rs 3,475 crore (US$ 492.98 million) will be released immediately; while the balance Rs 6,475 crore (US$ 918.57 million) will be infused later. Cabinet also approved increase in authorised share capital of NICL to Rs 7,500 crore (US$ 1.06 billion) and that of UIICL and OlCL to Rs 5,000 crore (US$ 709.32 million) respectively to give effect to the capital infusion. Further, the process of merger has been ceased so far in view of the current scenario and instead, the focus shall be on their profitable growth. 

Impact

The 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 the capacity to raise resources and improved risk management.

Financial implications:

In the current financial year, the immediate financial implication would be Rs 3,475 crore (US$ 492.98 million) as a result of capital infusion in three PSGICs namely OlCL, NICL and UIICL as the first tranche which will be followed by Rs 6,475 crore (US$ 918.57 million).

Way forward:

To ensure optimum utilization of the capital being provided, the Government has issued guidelines in the form of KPIs aimed at bringing business efficiency and profitable growth. In the meanwhile, given the current scenario, the process of merger has been ceased so far and/instead focus shall be on their solvency and profitable growth, post capital infusion.

 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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