The bill to increase the foreign direct investment limit in the insurance sector to 74 percent from the current 49 percent was approved by Rajya Sabha on Thursday.
Responding to the debate on the Insurance Bill (Amendment) 2021, Finance Minister Nirmala Sitharaman said foreign investment would help long-term domestic resources to keep the country’s insurance industry afloat.
The bill was passed by a voice vote.
Sitharaman said the decision to increase the FDI limit to 74 percent was taken after the IRDAI sector director held detailed discussions with stakeholders.
According to the bill, the majority of directors on board and key management persons would be resident Indians, at least 50 percent of directors being independent directors, and a certain percentage of profits maintained as a common reserve.
It was in 2015 that the government last raised the price of FDI in the insurance sector from 26 percent to 49 percent.
The rise in FDI aims to improve access to life insurance in the country. The life insurance premium as a percentage of GDP is 3.6 percent in the country, in a way below the global average of 7.13 percent, and in the case of general insurance, it is worse than 0.94 percent of GDP, as compared to the global average of 2.88 percent.
Sitharaman said India received a $ 26,000 million FDI in the insurance sector after 2015 when the foreign investment limit was increased by 49 percent from 24 percent.
He said insurance companies were under pressure to cut funds which was why the government was proposing to increase the FDI limit further.
He said foreign direct investment (FDI) was aimed at increasing long-term domestic investment.
Sitharaman said the increase in foreign investment to 74 percent would help meet the growing financial needs of insurance companies.
The minister emphasized that the bill to increase FDI insurance was introduced after extensive consultation with the IRDAI sector director.
The bill aims to increase the FDI limit in the insurance sector to 74 percent. An announcement in this regard was made by the minister during the unveiling of the Union’s budget on February 1.
Currently, the FDI limit allowed for health and general insurance stands at 49 percent, ownership and management regulation with Indians.