Indian govt raises FDI insurance cap to 49%
July 24, 2014, 8:34 am

A worker makes a wooden cricket bat at a factory at Sangam, south of Srinagar, Kashmir, India [Xinhua]

The decision was taken after a meeting of a central economic body, headed by Indian Prime Minister Narendra Modi.

“The Cabinet Committee on Economic Affairs has approved raising of FDI cap in insurance sector to 49 per cent from 26 per cent,” official sources were quoted by Indian news agency PTI.

The plans would need parliamentary approval to become law, which will be easy for the majority government of the Bharatiya Janata Party (BJP).

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

State-owned Life Insurance Corporation (LIC) 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.

The proposal to raise FDI cap has been pending since 2008 when the previous government introduced the Insurance Laws (Amendment) Bill to hike foreign holding in insurance joint ventures to 49 per cent from the existing 26 per cent.

The insurance sector was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999.

This Act permitted foreign shareholding in insurance companies to the extent of 26 per cent with an aim to provide better insurance coverage and to augment the flow of long term resources for financing infrastructure.

The industry has been demanding for long to increase the FDI limit for adequate funds for expansion of the sector.

Source: Agencies