New Delhi: The government aims to complete merger of three state-owned general insurance companies — National Insurance Co Ltd, United India Insurance Co Ltd, and Oriental Insurance Co Ltd — by the end of March, Finance Secretary Rajiv Kumar said. Respective boards of the three companies have already given their in-principal approvals for the merger.
“Merger of PSU general insurers is at an advanced stage. We can see that happening quite soon. It is already before the Cabinet,” Kumar told PTI in an interview. Though the merger process was in the works, the government would take a call on listing the merged entity after the merger, he said.
To facilitate the merger, the Budget has announced a capital infusion of Rs 6,950 crore into the three public sector general insurance companies (PSGICs) in the next financial year. This will help achieve requisite minimum solvency ratio by each of the three PSGICs, according to Budget documents.
“A partial budgetary support has been made in RE 2019-20 through first batch of supplementary demands for grants and provision for further capital infusion is included. The provision is met from the National Investment Fund,” it said. The government infused Rs 2,500 crore into the three insurers through first supplementary demands for grants for 2019-20 in December.
In his Budget Speech 2018-19, then finance minister Arun Jaitley had announced that the three companies would be merged into a single insurance entity. However, the merger process could not be completed due to various reasons, including poor financial health of these companies.
As on March 31, 2017, the three companies together had more than 200 insurance products with a total premium of Rs 41,461 crore and a market share of around 35 per cent. Their combined net worth was Rs 9,243 crore, with total employee strength of around 44,000 spread over 6,000 offices.
In 2017, state-owned New India Assurance Company and General Insurance Corporation of India were listed on the bourses. The government had raised nearly 17,500 crore through initial public offerings in New India Assurance Co Ltd and General Insurance Corp of India Ltd, the only listed state-owned non-life insurance companies.
With an aim to protect interest of depositors of cooperative banks, he said the government would amend the Banking Regulation Act to avoid repeat of PMC Bank type of fraud. “These cooperatives also play an important role in last-mile agriculture credit. So, while we need to allow them to continue to work, at the same time, if you are in the business of banking, if you are taking depositors’ money, you need to follow the same rigour and robustness of the banking system,” he said.
Under the Banking Regulation Act, the Reserve Bank of India (RBI) regulates and supervises the banking functions of urban co-operative banks, but their administrative control is with the Registrar of Co-operative Societies. Regulatory lacunae in co-operative banks have come to the fore after a whistle-blower complained to the RBI about financial irregularities at Punjab and Maharashtra Co-operative Bank, which is now under an administrator appointed by the central bank.