BENGALURU: In a major policy shift aimed at attracting greater capital inflows into the insurance sector, the government has increased the foreign direct investment (FDI) limit from 74 per cent to 100 per cent. While the industry has welcomed the move, experts caution that it may bring regulatory complexities that need to be carefully addressed.
"This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," Finance Minister Nirmala Sitharaman said.
Industry leaders believe the increase in FDI will encourage more global players to enter the Indian market.
Sanjay Agarwal, senior director at CareEdge Ratings, said, "In pursuit of insurance for all, the enhanced FDI limit in the insurance sector to 100 per cent from 74 per cent would provide necessary growth capital for the industry."
Rakesh Jain, CEO of Reliance General Insurance, noted that the decision will not only unlock fresh capital flows but also accelerate technological advancements, driving innovation and global best practices.
"As foreign participation increases, we can expect elevated customer experiences and more competitive offerings. However, as we embark on this journey, it's essential to strike a balance between growth and policyholder protection. A robust regulatory framework will be crucial in safeguarding policyholder interests while fostering sustainable growth," he added.
Amit Roy, partner and leader of insurance and allied businesses at PwC India, pointed out that the increased foreign investment will also require careful navigation of regulatory complexities, governance frameworks, and maintaining equilibrium between global and domestic players.
The move is also expected to bring more competition and options for policyholders. Debashish Banerjee, partner at Deloitte India, said, "This will help many foreign companies stay in India and bring in competition, which in turn should help the policyholder at large. It is a good move to help pump in fresh money."
While the new FDI cap is seen as a game-changer for the insurance sector, experts emphasise the importance of a strong regulatory framework to ensure policyholder protection and sustainable growth.