The committee of creditors (CoC) of Reliance General Insurance Company (RGICL), a subsidiary of debt-laden Reliance Capital (RCap), has rejected the demand for capital infusion of around ₹600 crore from the parent company to improve the solvency level. The development comes at a time when RGICL said it continues to lose business to rivals, impacted by “borderline” insolvency.
The CoC has rejected the proposal for fresh capital infusion, stating the firm is part of the bankruptcy proceedings and it would not be prudent to provide fresh funds. The decision came after a lenders’ meeting on Monday and Tuesday, sources close to the development said.
Earlier, the company had sought an “urgent” capital infusion of ₹600 crore from RCap to pursue growth. The firm needed the capital infusion by December 31 to preserve its business, enhance the value and take the company’s solvency to about 175% from the present 155%.
In its request to the administrator, RGICL had stated that this capital was required to pursue growth like most of its peers and help increase regulatory comfort at Insurance Regulatory and Development Authority (Irdai), apart from reflecting continued support by the promoter company.
Last week, the insurance firm reiterated its demand for the capital infusion stating that the borderline bankruptcy is creating business hesitation among corporate clients, government businesses, bagging of tenders and key retail and bancassurance partnerships. RGICL had sought the issue to be taken up by the CoC on an “urgent basis”.
The company had first raised the demand for capital in August last year.