The finance ministry has released a consultation paper proposing to raise the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%, ahead of the likely introduction a Bill to this effect in the ongoing Parliament session.
The department of financial services has sought stakeholders’ comments on the proposed insurance laws amendments by December 10. The winter session of Parliament will conclude on December 20. FE had reported earlier that a Bill would be introduced to this effect in the winter session.
The department said the proposed amendments aims to ensure accessibility and affordability of insurance for citizens, foster the expansion and development of the insurance industry, and streamline business processes.
“In this regard, a comprehensive review of the legislative framework governing the sector has been conducted in consultation with the Insurance Regulatory and Development Authority (IRDAI) and the industry. The proposal includes raising the FDI limit in Indian insurance companies from 74% to 100%, and enabling an insurer to carry on one or more classes of insurance business, as well as activities related or incidental to insurance,” an office memorandum dated November 26 stated.
The proposal further mentioned that the requirement of Net Owned Funds for foreign reinsurers is also proposed to be reduced from Rs 5,000 crore to Rs 1,000 crore.
Also, IRDAI is being empowered to specify lower entry capital (not less than Rs 50 crore) for underserved or unserved segments on a special-case basis. Micro insurance firms likely to benefit if capital requirement is lowered.