FDI cap hike gets insurance industry’s thumbs up

OUR BUREAU Mumbai | Updated on July 24, 2014 Published on July 24, 2014

The increase in FDI cap will be an enabling factor for insurance companies to go for listing on the stock exchanges, said IRDA chief TS Vijayan.

The capital-starved insurance industry is set to receive a major boost as the Cabinet has given its nod to the Insurance Laws (Amendment) Bill, which will raise the foreign direct investment limit from the current 26 per cent to 49 per cent with full Indian management control, say industry leaders.

TS Vijayan, Chairman of Insurance Regulatory and Development Authority (IRDA), said the increase in FDI will be an enabling factor for insurance companies to go for listing on the stock exchanges.

The listing will bring in more scrutiny and better corporate governance to the insurance industry, said the IRDA chief at New India Assurance 96th Foundation Day Lecture.

According to estimates by the Life Insurance Council, once the FDI cap is raised to 49 per cent, the sector will see foreign exchange inflows of $10 billion in the near term.

Kshitij Jain, MD and CEO of Exide Life Insurance, said, “The industry over the last 12 years has attracted over ₹34,000 crore of capital across all the private life insurance companies and over the next five to ten years the industry requires as much if not more in terms of fresh capital to be able to fund its growth and its expansion. The industry at this stage does need long-term capital for continued growth and expansion which FDI will bring in.” V Jaganathan, Chairman-cum-Managing Director, Star Health and Allied Insurance, said the proposal will help the insurance companies to maintain their solvency margins.

However, insurers are still awaiting clarity regarding full Indian management control.

At present, foreign partners can pick up 26 per cent stake through the automatic route with IRDA’s nod. However, the Government has said that to raise their stake to 49 per cent from 26 per cent, insurers will have to go through the Foreign Investment Promotion Board.

Anup Rau, MD and CEO of Reliance Life Insurance, said the industry was still awaiting clarity on some of the provisions. He said if FDI comes in with riders and cap on voting rights, it may act as a dampener for foreign shareholders.

The Bill is expected to be tabled in Parliament shortly.

Published on July 24, 2014

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.