Modi government is reportedly mulling 100% FDI in insurance sector
The Indian government is contemplating a proposal to increase the foreign direct investment (FDI) limit in the insurance sector, from 74% to 100% as per Times of India. This initiative, backed by the Insurance Regulatory and Development Authority of India (IRDAI), aims to further open up the sector to foreign investors. However, it requires political approval as it necessitates amending the Insurance Act.
Proposed changes to regulations
In addition to raising the FDI limit, discussions are underway about relaxing other FDI rules. These include the stipulation that certain senior management roles must be occupied by Indians. A comprehensive set of amendments to the law is being prepared, although the timeline for introducing this bill remains uncertain. The Department for Promotion of Industry and Internal Trade is also reviewing sectoral norms to facilitate more unrestricted investments.
Impact of increased FDI limit
The proposed increase in the FDI limit is expected to particularly aid the long-term and capital-intensive life insurance business. Promoter companies need to consistently invest to meet solvency requirements set by the regulator before they start making profits. This implies that only promoters with substantial financial resources can successfully enter and maintain operations in this sector.
IRDAI's role in proposed limit increase
A senior official from the Finance Ministry has stated that amendments to the law are being discussed with IRDAI and are tipped to be finalized soon. Given the BJP's present position in the Lok Sabha, which is below the majority mark, political clearance will be crucial. However, it is tipped that NDA partners will not oppose this plan.
