Centre sets rules to raise FDI cap in insurance to 49%

The ground has been set to raise the foreign direct investment (FDI) cap in the insurance sector to 49 per cent from 26 per cent.

Press note On Monday, the Commerce and Industry Ministry issued a press note on implementing the government decision to raise FDI cap in the insurance sector.

This follows approval given by the Union Cabinet to promulgation of an Ordinance hiking the FDI limit to 49 per cent in December last year.

The BJP-led government promulgated the ordinance just days after the legislation to amend the insurance law could not be passed in the Winter session of Parliament. As per the press note issued by the Department of Industrial Policy & Promotion, FDI up to 26 per cent in insurance will be through the automatic route, while levels above 26 per cent and up to 49 per cent will have to come through the government route.

Copies of the press note have been forwarded to officials in the Department of Economic Affairs and the Reserve Bank of India for “suitably incorporating the policy changes in the Foreign Exchange Management Regulation 2,000.” The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion during the Winter session despite being approved by the Select Committee of the Upper House, as Opposition parties had vehemently opposed it.

Bill soon in Parliament A Bill to replace the Ordinance is likely to be placed in Parliament in the on-going session.

FDI of up to 49 per cent in the insurance sector includes foreign investment in the forms of foreign portfolio investors, foreign institutional investors, qualified foreign investors, foreign venture capital investor and non-resident Indians. A foreign player can invest in insurance company, insurance brokers, third party administrators, surveyors and loss assessors and other insurance intermediaries appointed under the provisions of IRDA Act 1999.

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