The government infused Rs 2,500 crore in the three insurers -- National Insurance, Oriental Insurance and United India Insurance -- through first supplementary demands for grants for 2019-20 last month.
However, these companies would require additional Rs 10,000-12,000 crore capital dose to meet the prescribed solvency margin, sources said.
The sources further said that announcement to this effect can be made in the Budget 2020-21 that is scheduled on February 1.
Infusion will not only improve their financial health but facilitate merger announced in the Budget 2018-19.
In the Budget 2018-19 speech, then Finance Minister Arun Jaitley had announced that the three companies would be merged into a single insurance entity.
However, the process of merger could not be completed due to various reasons, including poor financial health of these companies. According to the sources, after the merger, the combined entity will be listed on the bourses.
Initial estimates suggest that the combined entity formed by merging the three insurers will be the largest non-life insurance company in India, valued at Rs 1.2-1.5 lakh crore.
As on March 31, 2017, the three companies together had more than 200 insurance products with a total premium of Rs 41,461 crore and a market share of around 35 per cent.
Their combined net worth was Rs 9,243 crore, with total employee strength of around 44,000 spread over 6,000 offices.
In 2017, state-owned New India Assurance Company and General Insurance Corporation of India were listed on the bourses. DP HRS