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Cabinet approves capital infusion of Rs 12,450 crore for the three public sector general insurance companies
New Delhi, July 8, 2020
The Union Cabinet today approved the capital infusion of Rs. 12,450 crore (including Rs 2,500 crore infused in FY 2019-20) in the three public sector general insurance companies.
These companies are the Oriental Insurance Company Limited (OlCL), National Insurance Company Limited (NICL) and United India Insurance Company Limited (UIICL).
While Rs 3,475 crore will be released immediately, the balance Rs 6475 crore will be infused later, an official press release said.
The Cabinet also approved an increase in the authorised share capital of NICL to Rs. 7,500 crore and that of UIICL and OlCL to Rs 5,000 crore each to give effect to the capital infusion, it said.
The capital infusion of Rs 3,475 crore will be allocated to the three companies -- OlCL, NICL and UIICL -- as the first tranche in the current financial year. The balance amount will be released in one or more tranches.
To give effect to the infusion, the authorised capital of NICL will be increased to Rs 7,500 crore and that of UIICL and OlCL to Rs 5,000 crore each.
The capital infusion will enable the three PSGICs to improve their financial and solvency position, meet the insurance needs of the economy, absorb the changes and enhance the capacity to raise resources and improved risk management, the release said.
In the current financial year, the immediate financial implication would be Rs 3,475 crore as the first tranche which will be followed by Rs 6,475 crore in the second tranche.
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 the merger has been ceased so far and focus will be on their solvency and profitable growth, post capital infusion.