Govt sets sights on 100% FDI in insurance, weighs options to secure political clearance
foreign direct investment (FDI) limit in the insurance sector from 74% to 100%, ToI reported on August 19. This initiative has the support of the Insurance Regulatory and Development Authority of India (Irdai), but it will require political approval since amending the Insurance Act is necessary, said the report (by Sidhartha).
The proposal aims to open up the sector further to foreign investors, as the current cap is seen as restrictive. Additionally, there are discussions around easing other FDI regulations, including the requirement that certain top management positions must be held by Indians. Officials, who are part of these conversations, revealed that a comprehensive set of amendments to the law is also in the works, although the timing for the bill's introduction is not yet decided. The Department for Promotion of Industry and Internal Trade is also reviewing sectoral norms to encourage more unbridled investments.
«Given that most large Indian companies and conglomerates have already invested in the insurance sector, officials said, it is time to allow 100% FDI in the sector since several foreign players with deep pockets are willing to come into the country but are not able to find a matching domestic player.»
A higher FDI limit would particularly benefit the long-term, capital-intensive life insurance business. Promoter companies need to continually invest to meet solvency requirements mandated by the regulator before the company starts generating profits. This means only deep-pocketed promoters can
