The Cabinet on Wednesday approved the infusion of Rs 2,500 crore into three public-sector general insurancecompanies--Oriental Insurance Co, National Insurance Co and United IndiaInsurance Co.

“As you know the government has infused ₹3 lakh crore into public-sector banks in the past three years.Similarly, we will start recapitalisation of general insurance companies intranches…The government will infuse more capital as and when required,"Union minister Prakash Javadekar said in a media briefing.

The capital infusion could be a step towards the merger ofthe three general insurance companies. However, a proposal for the merger isyet to be taken up for approval.

If merged, the operational efficiency and solvency ratio ofthe three entities is expected to increase. The profitability of thesecompanies may also improve.

“The government is infusing capital into these (insurance)companies so that the solvency ratio becomes acceptable and it fulfils thecriteria of IRDA (Insurance Regulatory Development Authority)," Javadekarsaid.

In financial year 2018-19, former finance minister ArunJaitley had proposed a merger of the three public-sector general insurancecompanies and list the merged entity on domestic bourses.

The Centre has already infused Rs 2,500crore into the three state-owned insurance companies via supplementary demandsfor grant earlier this year. Besides,Rs 6,950 crore will be infused in thesethree companies next year, according to the 2020-21 Budget document.