NEW DELHI: Finance Minister Nirmala Sitharaman on Monday introduced a Bill in the Rajya Sabha that seeks to amend the Insurance Act, thus raising Foreign Direct Investment (FDI) limit to 74 per cent for the sector. Currently, the permissible FDI limit in the life and general insurance stands at 49 per cent with ownership and management control with Indian.
“In order to achieve the objective of government’s Foreign Direct Investment Policy of supplementing domestic long-term capital, technology and skills for the growth of the economy and the insurance sector, and thereby enhance insurance penetration and social protection, it has been decided to raise the limit of foreign investment in Indian insurance companies from the existing 49 per cent to 74 per cent,” the Bill’s statement said The Union Cabinet had last week already gave its nod for amendments in the Insurance Amendment Bill 2021 and Finance minister Nirmala Sitharaman had made the announcement in this regard while presenting the Union Budget for 2021 on February 1.
“I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards,” Sitharaman had said in her Budget speech.Under the new structure, the majority of directors on the board and key management persons would be resident Indians, with at least 50 per cent of directors being independent directors, and specified percentage of profits being retained as a general reserve. An investor charter would be introduced across all financial products.
The average FDI investment in the 23 private life insurer is only 35.5 per cent, 30 per cent for 21 non-life private insurers and 31.7 per cent for the 7-specialised health insurance as of March 2019.