July 9, 2020 3:12:39 am
To improve financial and solvency position of state-owned general insurance companies, the Union Cabinet Wednesday approved fund infusion of Rs 12,450 crore in Oriental Insurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited. The government has given up plans of merging the three companies that was earlier announced in the Union Budget. This funding support comprises Rs 2,500 crore equity that was infused in 2019-20, another Rs 3,475 crore will be released immediately, while the balance Rs 6475 crore will be infused later.
“Further, the process of merger has been ceased so far in view of the current scenario and instead, the focus shall be on their profitable growth,” the government said in a statement. To enable fund infusion in these companies, the government has also enhanced their authorised share capital. The capital infusion will enable the three general insurers to improve their financial and solvency position, absorb changes and enhance the capacity to raise resources and improved risk management.
The boards of the three insurance companies had in January approved the merger process, setting the stage for the formation of a big insurance entity. Though former Finance Minister Arun Jaitley had announced their merger in Budget 2018-19, there was hardly any momentum in its implementation. The three companies have different technology and IT platforms, and platform migration and integration would have been an immediate challenge.
The three insurers have different technology and IT platforms, and platform migration and integration would have been an immediate challenge.
The Cabinet also gave gave nod for a three-month extension to the ongoing EPF (employees’ provident fund) contribution support for companies having up to 100 workers and 90 per cent of them earning up to Rs 15,000 per month. Finance Minister Nirmala Sitharaman had in May announced the extension of the benefit under the Pradhan Mantri Garib Kalyan Yojana till August.
Under the PMGKY package, the government will make payment of 12 per cent of employer and 12 per cent employee contribution into the EPF accounts for the eligible companies for the wage months of June, July and August. The benefit was provided earlier for salary months of March, April and May.
“The Union Cabinet chaired by the Prime Minister Narendra Modi today has given its approval for extending the contribution both 12 per cent employees’ share and 12 per cent employers’ share under Employees Provident Fund, totalling 24 per cent for another three months from June to August, 2020, as part of the package announced by the government under PMGKY/Aatmanirbhar Bharat in the light of COVID-19, a pandemic,” an official statement said.
The total expenditure under the scheme is estimated to be Rs 4,860 crore covering over 72 lakh employees in 3.67 lakh establishments.
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