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New Delhi, Sep 1 : Almost two years after the UPA government referred the Insurance Amendment Bill aimed at raising the foreign direct investment cap in the sector from 26% to 49% to a Group of Ministers (GoM), the panel finally paved the way for the Bill to be introduced in Parliament after a meeting on Monday afternoon.
Indicating that all major issues have been resolved, finance minister P Chidambaram told FE , “We will take it up to the Cabinet now.”
With the government having decided to convene the Lok Sabha on October 17, and Chidambaram reiterating the UPA’s intent to take forward the pending financial sector reforms agenda on several occasions in recent weeks, the Bill should get the Cabinet’s nod in the interim.
With the Left parties, which had been putting a spanner in the UPA’s reform works, pulling out of the ruling alliance in July, the government is keen to carry out key changes in the insurance, pension and banking sectors in its remaining shelf life.
Official sources said that while the overall structure of the Bill has been agreed upon in Monday’s meeting, there may be another round of meetings between officials to iron out minor differences.
The Insurance Bill was taken to the Union Cabinet in 2006. But following opposition from its erstwhile Left allies, the government had set up the GoM headed by external affairs minister Pranab Mukherjee to decide on the contentious issue of allowing more foreign investment in the insurance sector.
Besides increasing FDI, the Bill proposes comprehensive changes to insurance laws, including amendments to the Insurance Act of 1999, LIC Act of 1956, and the IRDA Act, 1999. It would also allow public sector non-life insurers to sell a minority stake to raise capital.
The Bill also aims to enable foreign reinsurance companies to enter the Indian market. This would especially benefit firms like Lloyd’s of London, the world’s largest society of underwriters. Lloyds has been keen on starting the reinsurance business in India, but had recently called back its India representative after losing hope of any movement on the requisite reforms. Apart from Lloyd’s, other reinsurance companies, including Munich Re and Swiss Re, are trying to get a full branch status in India.
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