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A proposal to infuse Rs. 9,950 crore into 3 insurers approved by the cabinet

The Cabinet on Wednesday approved a proposal to infuse Rs 9,950 crore this fiscal into three general insurers namely —National, Oriental, and United so as to prop up their precarious capital base and formally called off a proposed merger of these firms in the wake of the Covid-19 pandemic.

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The Cabinet further approved the broad contours of a proposed central sector scheme called Agriculture Infrastructure Fund. Under this Rs 1 lakh, crore will be given by the banks and financial institutions as loans. These loans will be primarily given to agricultural credit societies, marketing cooperative societies, farmer producers organizations (FPOs), self-help groups, farmers, and several other stakeholders.

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The Centre has already given Rs 2,500 crore to the insurers in the financial year 2020 and the total official infusion since previous fiscal stands at Rs 12,450 crore. The proposed infusion in the financial year 2021 is larger than the budgetary allocation of Rs 6,950 crore, as the government wants to enable them to at least maintain the lowest solvency ratio of 1.5 in times of the pandemic.

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The Cabinet

The finance ministry stated that “further, the process of a merger has been closed so far because of the present scenario, and instead, the main focus will be given on their profitable growth.”

Around Rs 3,475 crore will be provided immediately, while the left amount (`6475 crores) will be released later during this fiscal in one or more tranches, as per the released statement. The Cabinet also approved a rise in the authorized share capital of National Insurance Company to Rs 7,500 crore and that of United India Insurance Company and Oriental Insurance Company to Rs 5,000 crores each.

The merger of the insurers had been inordinately delayed, as it was to be wrapped up in that fiscal itself.

 

Also read:-India’s economy will shrink by 3.2 per cent in the current fiscal, the World Bank said on Monday