The Union Cabinet has approved the amendment in the General Insurance Business Nationalisation Act (GIBNA), 1972 to facilitate the privatisation of 1 General Insurance Company in the public sector.
Background: In the Budget 2020-21, Finance Minister Nirmala Sitharaman announced the proposal to privatise 2 Public Sector Banks (PSBs) and 1 General Insurance Company in 2021-22 and budgeted Rs 1.75 lakh crore from the stake sale.
- As per the proposal, the government has decided on an Initial Public Offering (IPO) of Life Insurance Corporation of India (LIC) and residual stake sale in IDBI Bank.
Amendments for Privatisation:
i.Currently there exist 4 general insurance companies in the public sector such as National Insurance Company Ltd (NICL), New India Assurance Company (New India) Ltd, Oriental Insurance Company Ltd (OICL), and the United India Insurance Company Ltd (UIICL).
ii.2 provisions of GIBNA, 1972 such as Section 10A and Section 10B might be amended to facilitate the privatisation.
- Section 10A – It defines the transfer of shares (of 4 public insurance companies) from General Insurance Corporation (GIC) to the Central government.
- Section 10B – It specifies the Central Government’s stake hold percent (not less than 51) in the insurance companies and the provision for GIC and the insurance companies to raise capital to increase their business in rural and social sectors.
iii.After the amendment, one of the 4 General Insurance Companies will be privatised (Not yet finalised by the Government).
iv.In 2020, the Union cabinet has approved the proposal to provide capital support to NICL, UIICL, and OICL and the Cabinet had also decided to increase the authorised share capital of NICL to Rs 7,500 crore and that of UIICL and OICL to Rs 5,000 crore each.
v.Amendments for PSBs Privatisation: Government would bring amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, for privatisation of PSBs.
Note – The task of recommending names for the privatisation of 2 PSBs and 1 General Insurance Company was assigned to NITI Aayog.
Recent Related News:
Government think-tank NITI Aayog has recommended the names of Central Bank of India and Indian Overseas Bank (IOB) for privatization in the current fiscal (2021-22), as part of the disinvestment process announced in the Union Budget 2021-22.
About General Insurance Corporation (GIC) of India:
i.The entire General insurance business in India was nationalized in 1972 by GIBNA and amalgamated the 107 insurers into 4 General Insurance Companies – NIC, New India, OICL, and UIIC.
ii.Later the government incorporated GIC in 1972 and made those 4 insurance companies as its subsidiaries.
iii.From 2003, the ownership of the 4 insurance companies and GIC were transferred to the government of India and notified GIC as the Indian Reinsurer.