Lenders of Reliance Capital (RCAP) have approved the capital infusion in Reliance General Insurance to improve solvency margin of the general insurance arm, according to sources.
The capital infusion is likely to happen by the end of August, they said.
Post the capital infusion by RCAP, Reliance General Insurance will also raise an additional Rs 400 crore Tier 2 capital to accelerate growth, sources said.
The capital infusion in Reliance General comes at a time when the Committee of Creditors (CoC) has approved the Resolution Plan of IndusInd International Holdings Ltd (IIHL), a Hinduja Group entity, with 99.6 per cent votes.
The lenders are expected to receive Rs 10,000 crore from the IIHL's resolution plan. The administrator of RCAP has also filed the IIHL's resolution plan with the NCLT for its approval.
Reliance General Insurance has in the past made multiple appeals to the CoC for the capital infusion.
The general insurer had earlier this year sought Rs 600 crore capital infusion from Reliance Capital, but the CoC rejected the demand.
Reliance General had said that the delay in the resolution process of Reliance Capital was causing severe stress to its business and the company urgently required Rs 600 crore capital infusion from Reliance Capital to improve its solvency level.
The company had said that borderline solvency was creating business hesitation in corporate clients, government businesses, tenders, and key retail and bancassurance partnerships which was being capitalized by the competitors.
RGIC had said that capital infusion will provide growth capital in line with the private sector growth of over 20 per cent.
The general insurance subsidiary of Reliance Capital Ltd is the most valuable business vertical, along with Reliance Nippon Life Insurance Company Ltd (RNLIC).
The fresh fund infusion will not only increase regulatory comfort at IRDAI but will also reflect continued support by the promoter company, sources said.
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