Due to the tough prevailing market conditions, the government of India has decided to put off the proposed merger of the three general insurance companies in India. The government had earlier proposed to merge National Insurance, United India Assurance and Oriental Insurance into one single entity to ensure greater economies of scale.

The first priority of the government is to ensure that these insurers are properly and adequately capitalized. Towards this end, the government has approved fund infusion to the tune of Rs.12,450 crore into the 3 insurance companies to ensure that they are better capitalized and have adequate buffers to handle growth in the future.

To begin with, the government will first focus on profitable growth for these three insurance companies and then look at a possible merger. The government had already made a provision of Rs.6950 crore to be infused into these three insurance companies. Capital will be largely output based to ensure that performance also improves with capital infusion.