InvestorQ : Why is the government infusing capital into the state owned general insurance companies to the tune of Rs.3000 crore?
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Why is the government infusing capital into the state owned general insurance companies to the tune of Rs.3000 crore?

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ishika Banerjee answered.
3 months ago
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The government of India has now committed to infuse Rs.3,000 crore as equity capital into the state owned general insurers with a view to boost their capital buffers. This will provide the much needed funding support for general insurers in India like the National Insurance, Oriental Insurance and United India Assurance.

In the Union Budget 2021, the government had promised to eventually sell a stake in the general insurance companies and take these companies towards privatization. Other than very critical industries, the government has committed to privatize all the other companies in non-critical industries. But, they will need to be well capitalized before that.

Currently, among the five state owned general insurers, only GIC Re and New India Assurance are already listed in the bourses. That leaves the other 3 companies viz. National Insurance, Oriental Insurance and United Assurance for listing to pave the way for subsequent privatization. The start will be made in this fiscal year.

The idea of this recapitalization is to make these predominantly loss making general insurers ready for a public issue and eventually help the government to hive off a majority stake in these general insurers. This will permit the eventual privatization in the real sense with private ownership and private management. 

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