In a circular dated 28 January, the Insurance Regulatory and Development Authority of India (IRDAI) issued guidelines on Group Health Insurance Policies upon Merger of Public Sector Banks (PSBs).
Addressing the interests of the group insurance policyholders of the 10 government-run banks that are set to be merged, IRDAI said, "Upon merger of these PSBs, the underlying group health Insurance policies of the customers of the merged banks shall continue to be serviced by the respective insurance companies which issued the policies till the end of policy period."
"The insurance companies shall make suitable arrangements with the acquiring banks to this effect," it added.
Further, at the end of the policy period of the group insurance of the merged bank, the acquiring bank at its option may continue with the same group insurance policy with the same insurance company for the customers of the merged bank.
The acquiring bank may at the same time continue to have insurance coverage for its existing customers with its existing insurance company and also offer this insurance coverage to the customers of the merged bank with the consent of its insurer.
While these guidelines come as a relief to lakhs of existing policyholders, it will not be applicable on already merged banks.
As these changes will apply with prospective effect, customers of Vijaya Bank and Dena Bank have already lost their policy benefits, according to a Times of India report. Bank of Baroda's acquisition of Vijaya Bank and Dena Bank became effective on 1 April 2019.
According to the TOI report, 64,000 credit card customers of Vijaya Bank lost their policy benefits after its merger with Bank of Baroda.