The Union Cabinet has approved amendments to the General Insurance Business (Nationalisation) Act (GIBNA) to facilitate privatisation of public sector general insurance firms, sources said. The Bill is likely to be tabled in Parliament in the ongoing monsoon session itself, they added.

Share Market Live

NSE

The amendment to GIBNA was approved by the Union Cabinet on Wednesday, the sources said, adding the Bill seeks to enable greater private participation in the public sector insurance companies. The Act, which came into force in 1972, provided for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of the general insurance business. Finance Minister Nirmala Sitharaman in her Budget 2021-22 had announced a big-ticket privatization agenda, including privatisation of two public sector banks and one general insurance company.

As part of the divestment strategy for the financial sector, the government has decided to go for a mega initial public offering (IPO) of Life Insurance Corporation of India (LIC) and residual stake sale in IDBI Bank during this financial year. The government has budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions during 2021-22. The Niti Aayog was entrusted with the task of recommending names for the privatisation of two public sector banks and one general insurance company.

The government think-tank is believed to have suggested the name of United India Insurance to the Core Group of Secretaries on Disinvestment, headed by the Cabinet Secretary. Aside from this, the government is gearing up to table amendments to the Banking Regulation Act, 1949, to enable privatisation of two public sector banks. Amendments would be required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, for privatisation, the sources said. These Acts led to nationalisation of banks in two phases, and provisions of these laws have to be changed for privatisation of lenders, they said.

Last year, the Union Cabinet headed by Prime Minister Narendra Modi had cleared a proposal to provide capital support to National Insurance, Oriental Insurance and United India Insurance. The Cabinet had also decided to increase the authorised share capital of National Insurance Company Ltd (NICL) to Rs 7,500 crore and that of United India Insurance Co Ltd (UIICL) and Oriental Insurance Co Ltd (OICL) to Rs 5,000 crore each to give effect to the capital infusion decision. At the same time, the Cabinet junked the earlier Budget proposal of merging NICL, OICL and UIICL.