Key Takeaways
- Three public sector insurers – Oriental, National, and United India Insurance – may merge into one entity
- Government infused ₹17,450 crore between 2019-22 to improve their financial health
- Privatisation of one general insurance company also under consideration
- FDI limit in insurance may increase from 74% to 100% in upcoming Winter Session
The Finance Ministry is reviving plans to merge three state-owned general insurance companies into a single entity, following their improved financial performance. This historic consolidation aims to create a more efficient and scalable insurance giant.
Background of the Merger Proposal
The merger plan was first announced in the 2018-19 Budget by then Finance Minister Arun Jaitley. However, the government shelved the proposal in July 2020, opting instead for a ₹12,450 crore capital infusion into Oriental Insurance, National Insurance, and United India Insurance.
Between 2019-20 and 2021-22, the government injected a total of ₹17,450 crore to rescue these companies from financial distress. With their finances now stabilized, ministry sources confirm a preliminary assessment of the merger is underway.
Privatisation Agenda Advances
Alongside the merger, the government is examining the privatisation of one general insurance company. Finance Minister Nirmala Sitharaman had announced this as part of her 2021-22 Budget privatisation agenda, which also included two public sector banks.
Parliament approved the General Insurance Business (Nationalisation) Amendment Act in August 2021, removing the mandatory 51% government stake requirement. This legislation enables greater private participation while aiming to increase insurance penetration across India.
FDI Limit Increase Proposed
The government plans to introduce a bill in the upcoming Winter Session of Parliament to raise the foreign direct investment limit in insurance from 74% to 100%. This move would facilitate entry of overseas players and help meet growing insurance demand.
The Winter Session is scheduled from December 1 to December 19, comprising 15 working days where this significant legislation will be discussed.
