Government to infuse Rs. 3,000 crores in general insurance companies this quarter

The capital infusion of Rs. 3,000 crores in the general insurance companies will enable the three public sector insurance companies to improve their solvency and financial position.

Created On: Feb 15, 2021 11:42 ISTModified On: Feb 15, 2021 11:42 IST
Capital infusion in Insurance companies

The Ministry of Finance will infuse Rs. 3,000 crores capital into the state-owned general insurance companies in the current quarter in order to improve their financial health.

The government, recently, has sought the Parliament’s approval for the gross additional expenditure of Rs. 6.28 lakh crores for 2020-21 as part of the second and final batch of the supplementary demands for the grants.

It included Rs. 3,000 crores for providing the additional funds towards the recapitalization of the insurance companies.

The announced infusion by the Finance Ministry will be done after the supplementary demands for the grants are passed by the Parliament which will reconvene on March 8, 2021.

Why the announced capital infusion is significant?

The capital infusion of Rs. 3,000 crores in the general insurance companies will enable the three public sector insurance companies to improve their solvency and financial position.

With this infusion, the companies will also be able to meet the insurance needs of the economy, improve risk management, absorb changes and enhance the capacity to raise resources.

Increase in the share capital of Insurance companies:

In 2020, the Union Cabinet headed by PM Modi had cleared the proposal to provide capital support to the Oriental Insurance, National Insurance, and United India Insurance.

The Union Cabinet had decided to increase the authorized share capital of the National Insurance Company Limited- NICL to Rs. 7,500 crores and that of the Oriental Insurance Company Limited- OICL and United India Insurance Company Limited- UIICL to Rs. 5,000 crores each in order to give effect to the capital infusion decision.

Privatization of banks and insurance companies:

The Union Finance Minister Nirmala Sitharaman in Budget had announced the privatization of one general insurance company and the two public sector banks in 2021- 2022 beginning April.

In the year 2017, the state-owned companies General Insurance Corporation of India and New India Assurance Company had gone public.

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