These Indian government-owned insurance firms might be merged soon
What's the story
The Indian Finance Ministry is mulling over a merger proposal for three state-owned general insurance companies: Oriental Insurance, National Insurance, and United India Insurance. The move comes after these companies showed signs of financial recovery. The merger is intended to improve efficiency and scale in the sector. Between 2019-20 and 2021-22, the Indian government had pumped ₹17,450 crore into these firms to help them recover from financial distress.
Previous attempts
Merger proposal: A look back at the past
The merger proposal was first announced by former Finance Minister Arun Jaitley in the Budget for 2018-19. However, the government changed its mind in July 2020 and approved a capital infusion of ₹12,450 crore into these companies instead. Now, with their financial health improving, the Finance Ministry is revisiting this merger plan as part of a broader strategy to enhance efficiency in public sector insurance firms.
Privatization plans
Privatization proposal under consideration
Along with the merger, the Finance Ministry is also looking into a proposal to privatize one of these general insurance companies. The move is part of a larger privatization agenda announced by Finance Minister Nirmala Sitharaman during her 2021-22 Budget speech. The General Insurance Business (Nationalization) Amendment Act, 2021, which allows for the privatization of state-owned general insurance companies, was passed by Parliament in August 2021.
FDI increase
New bill to increase FDI limit in insurance sector
To boost insurance penetration and social protection, the government is also pushing a bill to raise the Foreign Direct Investment (FDI) limit in the insurance sector. The move is aimed at facilitating entry of new foreign players into the market. The Winter session of Parliament, during which this bill will be introduced, is scheduled from December 1-19 with 15 working days.