The draft Bill, which has been sent for approval by the Union Cabinet before introducing it in Parliament, seeks to remove the 51% floor on government holding, official sources told TOI. Foreign investors will be able to hold up to 74% in the divested general insurance firm subject to Indian management and control, government sources said, while ruling out any plan to sell New India Assurance or GIC.
While NITI Aayog has suggested the name of at least one general insurer to be privatised, sources said, a decision on which one of the three — United India, National or Oriental Insurance — will be privatised is yet to be taken. The name has been shared with the Department of Investment and Public Asset Management and will be recommended by a panel of secretaries with ministerial panel taking a call on it before it is endorsed by the Union Cabinet.
The sources indicated that the process of finalisation will take place after the Bill is cleared by Parliament. The government is hoping for its passage later in the year, paving the way for privatisation of India’s first insurance company sometime next year.
In the Budget, finance minister Nirmala Sitharaman had announced the privatisation of one general insurance company and two public sector banks, for which the process is yet to commence.
The Finance Ministry is planning to amend the banking laws for the sale of the two state-run lenders later this year and the Bill to amend the Bank Nationalisation Act will draw upon some of the features of the General Insurance Business (Nationalisation) Act.
As reported first by TOI on June 7, NITI Aayog has identified Central Bank of India and Bank of Maharashtra for privatisation.
Government sources said that work has already begun on the listing of Life Insurance Corporation (LIC) later in the financial year with the valuation exercise underway. The valuation will help the government decide on the size of the issue, which will also be based on the feedback it receives during roadshows in the coming months.
“Depending on the investor appetite and what the merchant bankers say, we will decide on the extent of share sale,” said an officer. Given the high valuation for the insurance behemoth, the issue size may be limited to 10% or so, the sources indicated. Last week, the cabinet had cleared the LIC public offer.