The Centre has operationalised the 100 per cent foreign direct investment (FDI) window under the ‘automatic’ approval route for insurance intermediaries, nearly eight months after the Budget announcement in this regard.

The Department for Promotion of Industry and Internal Trade (DPIIT) has brought in amendments to the Consolidated FDI policy of 2017 for this purpose.

While placing the foreign equity investment cap of 100 per cent for insurance intermediaries, the DPIIT has made it clear that the condition of ‘Indian owned and controlled’ applicable for insurance companies would not be applicable to intermediaries and insurance intermediaries.

The composition of the Board of Directors and key management persons of the insurance intermediaries would be specified by the concerned regulators from time to time, the DPIIT has said.

Also, the insurance intermediary that has majority shareholding of foreign investors should have at least one from among the Chairman of the Board of Directors or the Chief Executive Officer or principal officer or Managing Director of the insurance intermediary as a resident Indian citizen.

Prior permission of insurance regulator IRDAI is also needed for repatriating dividend.

Insurance intermediaries with majority shareholding of foreign intermediaries cannot make payments to the foreign group or promoter or subsidiary or interconnected or associate entities beyond what is necessary or permitted by the IRDAI.

Expert take

Joydeep Roy, Leader-Insurance, PwC India, said that the move by DPIIT seeks to operationalise the Budget 2019 announcement ratifying the 2015 ITDA committee recommendation of raising the FDI limit in insurance intermediaries after three years up to 100 per cent with enabling stipulations for profit repatriations and leadership composition.

“On top of that, it has sought to remove any confusion by including the basic tenets of the FDI of insurance companies and applicability for banks as well, to make this a comprehensive document that people can refer to and not get confused over various regulations and circular issues from time to time,” he said.

According to Anuj Shah, Insurance and General Corporate Partner at Khaitan & Co, “Given that the Ministry of Finance had permitted 100 per cent FDI in insurance intermediaries back in September 2019, the changes to the FDI policy is a much-awaited welcome move.

“The insurance sector in India is in a tremendous growth phase and with this change, we hope to witness greater influx of FDI ― either as greenfield investments or consolidation of existing investments.

“As we await consequent amendment to the FEMA rules to operationalise this change, it is hoped that the government will consider increasing FDI limits for insurance companies as well.”

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