IRDAI Current Affairs - 2020

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RBI launches 5-year Financial Inclusion Strategy

The Reserve Bank of India has launched National Strategy for Financial Inclusion (2019-24). The main motive of the strategy is to provide access to financial services in an affordable manner.

Highlights

The Strategy has been launched after thorough consultation with SEBI (Securities Exchange Board of India), PFRDA (Pension fund Regulatory and Development Authority of India) and also Insurance Regulatory and Development Authority of India (IRDAI). The strategy was launched based on the recommendations of the Financial Inclusion Advisory Committee that worked in consultation with the above agencies.

Key Recommendations

The following are the recommendations included in the strategy

  • The committee has recommended Universal Financial Access. Under this, every village will have formal financial service provider within a radius of 5 km.
  • The committee has recommended for the strengthening of Digital Financial Services to reach a less-cash society by 2022.
  • Every adult registered under Pradhan Mantri Jan Dhan Yojana should be enrolled in pension scheme and insurance scheme
  • The Public Credit Registry shall be made completely operational by March 2022.

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GoI merges three Insurance PSUs

The GoI will merge 3 public Sector Insurance Companies as announced in budget 2019-20. The merger includes United India Insurance Limited, National Insurance Co Limited and Oriental Insurance Company Limited.

Highlights

  • The Budget 2019-2020 did not make provision of funds for insurers and the Department of Financial Services. Therefore, the government institutions in the financial sector are forced to seek supplementary demands to fulfil their purposes. The Budget allocated Rs 12,000 crore for this.
  • The General Insurance Companies have sought Rs 500 crore to Rs 3000 crore each to avoid falling below solvency ratio. However, the three companies that are to be merged are struggling to maintain minimum solvency ratio of 1.5

Laws on solvency Ratio

According to the Guidelines of Insurance Regulatory and Development Authority of India, an insurance company has to compulsorily maintain a minimum solvency ratio of 1.5.

The solvency ratio is calculated by dividing company’s tax net operating income by its total debt obligation. The ratio indicates if the enterprise is able to meet its debt obligations. The lower the ratio, the greater is its probability to default its debt obligations.

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