Finance Minister Nirmala Sitharaman introduces Bill to facilitate hike in insurance FDI : 16-03-2021

Finance minister Nirmala Sitharaman on Monday introduced in Rajya Sabha a Bill to amend the Insurance Act, 1938, which will pave the way for raising the foreign direct investment (FDI) limit in insurance up to 74% from 49%.

The Insurance Amendment Bill, 2021, was cleared by the Cabinet last week and is in sync with a proposal in the Budget for FY22.

Separately, responding to a question in the Lok Sabha, the minister said the government has no plan yet to launch diaspora bonds, scotching speculations in some quarters that such securities could be introduced as a special window for the Indian diaspora to invest in the country.

The proposal to hike the FDI limit in insurance is expected to open up new avenues of funding at a time when some players are struggling with solvency issues, analysts have said. The move, along with the decision to launch the IPO of LIC and privatise one of the government-owned general insurers, would bring more efficiency to the market.

Apart from drawing new foreign investors, the hike in FDI limit will also allow foreign partners, currently in joint ventures, to raise their stake and control the Indian insurance firms. Over a dozen insurance companies in India are formed of joint ventures between domestic and foreign partners, including ICICI Prudential, HDFC Standard Life, Bajaj Allianz and Star Union Daiichi Life Insurance.

While presenting the Budget 2021-22, finance minister Nirmala Sitharaman had proposed to amend the Insurance Act, 1938, to increase the FDI limit in insurance companies and “allow foreign ownership and control with safeguards”.

Under the new structure (for building in safeguards), the majority of directors on the board and key management persons would have to be resident Indians, with at least half of directors being independent ones, and specified percentage of profits being retained as general reserve.

The life insurance sector in India was liberalised in 2000 after the government had allowed foreign companies to own up to 26% in domestic insurers. The sector was opened up further in 2014 when the FDI limit was hiked to 49%.

Source : Times of India

error: Content is protected !!