NEW DELHI - India's insurance regulator on Friday ordered the takeover of a unit of Sahara India Life Insurance by SBI Life Insurance, following the company's "continuous deterioration of financial position".
The Insurance Regulatory and Development Authority of India (IRDAI) on Friday said the life insurance business of Sahara India Life will be transferred to SBI Life with immediate effect.
SBI Life clarified that there will be a transfer of Sahara India Life's policyholder assets and liabilities, but no merger between the two entities.
A statement issued by Sahara India Life said the matter is currently under consideration with the Securities Appellate Tribunal and the next hearing is scheduled for June 6.
Sahara India Life has been under the regulator's scrutiny since 2017 for allegedly acting against policyholders' interests. IRDAI had appointed an administrator to run the insurer the same year.
The administrator had found that Sahara India Life's promoters were no longer fit to run the company and had allegedly diverted funds.
"If the trend is allowed to continue, the situation will worsen and lead to erosion of capital and Sahara India Life Insurance Co may not be able to discharge its liabilities towards policyholders," IRDAI said on Friday.
As per the regulator's order, SBI Life will take over the liabilities of about 200,000 policies and assets of Sahara India Life.
SBI Life will have to integrate the systems for its life insurance business with that of Sahara India Life within one year, the IRDAI order said.
The insurance regulator has formed an internal committee to oversee the acquisition in a "time bound" and "smooth" manner.
"IRDAI will continue to monitor the situation and also issue necessary directions as required in the interest of the policyholders of Sahara Life," the regulator's statement said.
(Reporting by Nikunj Ohri in New Delhi; Additional Reporting by Rishabh Jaiswal in Bengaluru; Editing by Pooja Desai)