NEW DELHI: Finance Minister Nirmala Sitharaman on Thursday said that the limit of 74 per cent foreign direct investment (FDI) in the insurance companies is not a compulsion and is aimed at improving life insurance penetration in the country.
“Increasing limit doesn’t mean automatic foreign investment to that level to all companies. Every company will decide for themselves, whether they want that money, to what extent, and so on. So, this enabling amendment is only to allow them to receive some money but not exceed 74 per cent,” Sitharaman said during a debate over the Insurance Bill in Parliament. The Rajya Sabha on Thursday passed the Insurance (Amendment) Bill, 2021, hiking FDI cap in insurance.
Defending the Bill, Sitharaman said that the decision to increase the FDI limit was taken after sector regulator IRDAI held detailed consultations with stakeholders and that there were enough safeguards to protect the interest of claimants. Policyholders’ money will have to be invested within India, she added.
The finance minister said that India had received FDI worth Rs 26,000 crore in the insurance sector since 2015 when the foreign investment limit was raised to 49 per cent from 24 per cent.
According to the amended bill, the majority of directors on the board of insurance companies and key management will have to be resident Indians, with at least 50 per cent of directors being independent directors, and a specified percentage of profits being retained as a general reserve.