India govt seeks to raise FDI limit in insurance
November 5, 2014, 8:46 am

A laborer carries the raw salt at an ancient salt field in Devla-Nada area of Gujarat, India, May 1, 2014 [Xinhua]

Indian Finance Minister Arun Jaitley on Wednesday expressed hope that the long-pending Insurance Amendment Bill, that seeks to raise FDI in the sector from existing 26 per cent to 49 per cent, will be approved in the Indian Parliament during its upcoming Winter Session.

“I do hope that the amended bill would be passed in the forthcoming session of Parliament later this month,” Jaitley said at the India Economic Summit in New Delhi.

India’s BRICS partners Brazil and South Africa allow 100 per cent FDI in insurance, Russia 49 per cent and China 50 per cent.

In stark contrast to other areas of India’s financial services where the FDI limit were raised after five years, it’s been fourteen years since the FDI limit in insurance has stayed at 26 per cent.

The month-long winter session of the Indian Parliament is scheduled to commence from November 24.

The Insurance Bill, first introduced in the Indian Parliament in 2008 by the former ruling party, the Congress, has been referred to a 15-member Select Committee of Indian lawmakers which will submit a report by the third week of November.

The long-pending bill was stalled in the Indian Parliament because of opposition from several political parties, including the now-ruling BJP.

The Bill amendment comes with a rider that the management control would rest in the hands of Indian promoter.

The Finance Minister on Wednesday said India is pursuing the policy of allowing foreign investment with sectoral cap keeping in mind the requirements of the economy and the appetite of the Indian political system.

India’s insurance industry needs around $12 billion in capital by 2020. An increase in FDI limits would bring in an estimated $1-3.5 billion immediately, say experts.

The move would help insurance firms to get much needed capital from overseas partners.

State-owned Life Insurance Corporation (LIC) currently accounts for 83 per cent of the Indian insurance market share.

The move would help insurance firms to get much needed capital from overseas partners.

Aviva Plc (AV/), Allianz SE (ALV) and ING Groep NV (INGA) are among global insurers that will be able to further invest in their Indian ventures if the cap is raised.

There are about two dozen private sector insurance firms both in life and non-life segment in the country.

TBP and Agencies