Rajya Sabha passes bill to raise FDI limit in insurance sector to 74{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca}

A bill to increase foreign direct investment limit in the insurance sector to 74 per cent from the current 49 per cent was approved by the Rajya Sabha on Thursday.

Replying to the debate on Insurance (Amendment) Bill, 2021, Finance Minister Nirmala Sitharaman said foreign investment will supplement domestic long-term resources with a view to further insurance penetration in the country.

The bill was passed with a voice vote.

Sitharaman said the decision to increase the FDI limit to 74 per cent was taken after sector regulator IRDAI held detailed consultations with stakeholders.

As per the bill, the majority of directors on the board and key management persons would be resident Indians, with at least 50 per cent of directors being independent directors, and specified percentage of profits being retained as a general reserve.

It was in 2015 when the government had last hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent.

Increase in FDI is aimed at improving life insurance penetration in the country. Life insurance premium as a percentage of GDP is 3.6 per cent in the country, way below the global average of 7.13 per cent, and in case of general insurance, it is even worse at 0.94 per cent of GDP, as against the world average of 2.88 per cent.

Sitharaman said India received FDI worth Rs 26,000 crore in the insurance sector after 2015 when the foreign investment limit was raised to 49 per cent from 24 per cent.

She said insurance companies are facing liquidity pressure and that is why the government was proposing to increase the FDI limit further.

She said the foreign direct investment (FDI) is aimed at supplementing the domestic long term capital.

Sitharaman said hike in foreign investment limit to 74 per cent will help meet the growing capital requirement of insurance companies.

The minister stressed that the bill to hike FDI limit in insurance has been brought after extensive consultations by sector regulator IRDAI.

The bill seeks to increase the FDI limit in the insurance sector to 74 per cent. The announcement regarding it was made by the minister while presenting the Union Budget on February 1.

Currently, the permissible FDI limit in life and general insurance stands at 49 per cent, with ownership and management control with Indians.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor