New Delhi: The finance ministry is examining the possibility of merger of two state-run financial institutions India Infrastructure Finance Company (IIFCL) and IFCI to create a bigger financing firm for the sector.

The proposal is under the active consideration of the ministry so that the huge deficit, which infrastructure space has, can be bridged, a senior finance ministry official said. Currently, the financial institutions are not capable of financing huge infrastructure requirement as there is mismatch between asset and liability, the official said.

Asked if merger in the general insurance space is also being considered, the official said there is no such proposal. "We just have four general insurance companies, so where is the scope of merger. These are small entities with regional focus," the official said.

There are four PSU general insurance companies New India Assurance Company, United India Insurance Company, Oriental Insurance Company and National Insurance Company. Recently, the Cabinet approved the reduction of a stake in five state-owned general insurance companies to 75% by listing them on the bourses. The Cabinet Committee on Economic Affairs, headed by Prime Minister Narendra Modi, gave nod to listing of five government-owned general insurance companies including re-insurance firm General Insurance Corp of India (GIC).

The government shareholding in these companies will be reduced from 100 per cent to 75 per cent in one or more tranches over a period of time and the department of investment and public asset management (DIPAM) has already identified companies and initiated process in some cases.

The government plans to divest Rs 11,000 crore worth of stake in public sector unit (PSU) general insurance companies to meet the steep disinvestment target of Rs 72,500 crore next fiscal.