Banking and insurance have key roles to play in the economy and social structure of the country. Yet, the ball of consolidation has landed only in banks’ court.
Employees of public sector general insurance companies have been demanding consolidation (merger) in the sector, but the government has not even bothered to respond, according to the representatives of employees’ organisations in the sector. It exposes the double standards adopted by the government, they say.
The government’s agenda is to sell off its stake in the general insurance companies to private players as part of the disinvestment policy, says C.B.Venugopal, State General Secretary of Kerala State General Insurance Employees Union, affiliated to All India Insurance Employees Association.
The association had sought a merger in the general insurance sector and represented it at the highest level, but the government has preferred to keep mum over the issue. “There is severe competition in the insurance sector; premium undercutting is rampant. The competition among the public sector companies has been unhealthy, impacting growth.”
Pointing out that the four public sector general insurance companies have a total capital of Rs.700 crore and general reserves of over Rs.14,000 crore, he said consolidation would bring forth a stronger entity which would effectively compete with private players.
The public sector general insurance companies have over 4,200 branches across the country, while Life Insurance Corporation has only about half the number of offices; yet, the latter’s performance has grown way ahead of the former, primarily because of the advantage of being a larger entity, he says.
Consolidation is required in the public sector general insurance sector, says P.P.Mohanan, State General Secretary of General Insurance Officers All India Association. The government is pursuing a hidden agenda of listing the companies in the stock market and that is the reason for ignoring the employees’ demand for a merger, according to him. The general insurance business was nationalised from January 1, 1973 by amalgamating 107 insurers and then grouping into four companies, namely National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Insurance Company Limited and the United India Insurance Company Limited.
The government’s lack of interest in consolidating general insurance is in direct contrast with its move in banking. The State Bank Group Chairman Pratip Chaudhuri has disclosed in Kochi that measures for merging a bank of the State Bank Group with the parent bank will be taken this financial year. Making a global entity in banking is the government’s aim.
“SBI Chairman is echoing the views of the UPA Government,” says C.D.Josson, All Kerala Bank Employees Federation leader. Stock brokers are trying to take advantage by raising the share prices of the banks being identified for merger. Such a proposal and propaganda is in conflict with people’s interest, he says.
“The global banking and financial crisis of 2008 has proved that the concept of ‘too big to fail’ relating to large banks is wrong,” he says.
While merger of banks is being promoted despite protest, Centre ignores demand for consolidation in insurance sector