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Centre to infuse Rs 12k cr in public sector insurance Cos
Following the recapitalisation of public sector banks (PSBs), now public sector insurance companies – National Insurance, Oriental Insurance and United India Insurance – are going to be infused with funds worth Rs 12,000 cr to boost their capital base and meet regulatory norms.

New Delhi
The Budget had provisioned Rs 70,000 crore for PSB recapitalisation and last week a Rs 55,250-crore infusion was announced in several PSBs for regulatory and growth requirements.
The nodal Department of Financial Services has approved the Rs 12,000 crore capital infusion plan in the three state-run general insurance companies as their financial conditions are very weak. Last year’s Budget announced plans to merge these three insurance companies, and thereafter list the combined entity.
The process of merger could not be completed due to various reasons, including the companies’ poor financial health. For listing, a 1.5 solvency ratio is needed which at present is not the case with two of these companies.
These two units are struggling to maintain their solvency ratio, which is a key financial metric used to measure a company’s ability to meet its debt obligations.
As against the Insurance Regulatory and Development Authority’s solvency ratio norm of 1.5, National Insurance has a solvency ratio of 1.5, while United India’s level is lower at 1.21. The consolidation in the public sector general insurance companies is part of the disinvestment strategy of the government. The Centre had appointed EY as a consultant to see through the completion of the merger.
The Centre would have to infuse Rs 12,000-13,000 cr in these three firms to improve their solvency ratio and prepare them for the merger.
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