Insurance sector might be the next to be opened up for foreign direct investment. The Insurance Regulatory and Development Authority (IRDA) feels the sector should be allowed 49% FDI for growth of insurance sector in India.
“This sector requires lot of money so unless we enable inflow... Look at it in banks it (FDI) is 74%. In asset management companies 100%. I do not see why in insurance companies it should be 26 per cent.
We should increase that, J. Hari Narayan, Chairman IRDA said on the sidelines of an industry function here on Tuesday. He added, “Absolutely in favour of hike in FDI limit. I do think unless we go for 49% we will not have the kind of capital required to underpin the growth of insurance industry, Narayan added. After a slew of reforms in the multi-brand retail and aviation sectors, the government is is also contemplating a big boost to the domestic insurance sector. Finance Minister, P Chidambaram had last week after a meeting with the chairman-cum-managing directors and chief executive officers announced a raft of measures, including easing investment norms for the companies, faster clearance for new products, easing of procedures, and allowing banks to sell products of more than one insurance company among other.
At present FDI in the insurance sector is capped at 26%. With the government taking policy reform initiatives last week especially allowing FDI in multi-brand retail and aviation sectors there is expectation that the limit for the insurance industry may be raised as well.
The Insurance Laws Amendment Bill has been pending before Parliament for about four years as there has been no consensus among political parties on the issue of raising theFDI limit to 49%.
Following pressure from key allies the government in May this year had postponed a decision on raising the FDI limit in the insurance sector to 49%.
The Insurance Bill which was tabled in the Rajya Sabha in 2008 proposed to increase the FDI limit in the insurance sector to 49 per cent but Parliamentary Standing Committee on Finance wanted it to be retained at the current level of 26 per cent.