The Finance Ministry is looking at ways in which private insurance companies can be allowed to raise more funds without hiking the foreign direct investment cap in the sector to 49 per cent.
"Now we have to look afresh on this (insurance sector) ...whether there could be some other instrument (to permit private companies to raise funds) without raising (FDI cap) to 49 per cent. All these issues we have to address and then come back to the government," Financial Services Secretary G S Sandhu said.
He spoke to reporters after making a presentation to Finance Minister Arun Jaitley on issues related to the banking and insurance sector.
Observing that no decision was taken at the meeting, Sandhu said, "We have to examine a few issues on what are the other options available to attract capital. Whether there are other options available, whether we could go in a more gradual manner. So we have to look at some other options. We are not ruling out. Neither are we saying yes nor no."
Sandhu said one option could be to raise the FDI limit in various insurance segments in a phased manner.
"We will see whether we need to take up this whole hog in all categories of insurance or we can start in some particular categories first. We have to examine that. Then we have to talk to major players and see what could be other options apart from this," Sandhu said.
The ruling Bharatiya Janata Party is opposed to raising the FDI cap in the insurance sector from 26 per cent to 49 per cent. A proposal to hike the FDI cap in the sector was mooted by the previous United Progressive Alliance government and has been pending in Parliament since 2008.
The Standing Committee on Finance had earlier rejected the proposal, saying it may not have the desired effect and could expose the economy to global vulnerability.
The insurance sector was opened up to the private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999.
The insurance industry has sought an increase in the FDI limit to raise funds for expansion.