Govt. may Consider Raising FDI Limit in Insurance Sector to 49%

In a bid to give push to reforms, government may consider raising Foreign Direct Investment (FDI) limit in insurance sector to 49% from current 26%. In coming days cabinet will consider 49% FDI in insurance sector once again.

Earlier this, in a meeting held on 10 May 2012, cabinet had deferred the decision of FDI ceiling in insurance sector.

Earlier, standing committee on finance headed by former finance minister, Yashwant Sinha, in December 2011 had rejected the government’s proposal of raising FDI ceiling in insurance sector.

The committee in its report on the insurance laws (amendment) bill 2008 had said that the proposal of raising FDI ceiling in insurance sector to 49% seems to be decided upon without any sound and objective analysis of the insurance sector following the liberalisation. It also said that raising FDI cap in insurance sector would not necessarily have the desired impact.

It also said that increased roll of foreign capital may lead to the possibility of exposing the economy to the vulnerabilities of the global markets i.e. flight of the capital outside the country and also endangering the interest of policyholders.

However, standing committee had agreed on the need to bring in comprehensive changes in the archaic laws governing the insurance sector.

Foreign insurers and their domestic partners have been demanding to increase the FDI limit in the sector to fund business expansion.

The government had introduced the insurance bill in Rajya Sabha in December 2008 to bring in the change in laws governing insurance sector in the changed scenario of private participation.