The government has created a special window for Foreign Direct Investment (FDI) of up to 20% in Life Insurance Corporation of India (LIC) through changes in the FDI Policy. This FDI in LIC has been allowed through the automatic route.
The amendments to the FDI Policy by the Department for Promotion of Industry and Internal Trade (DPIIT) through Press Note 1 of 2026. The changes in the policy would also allow for FDI up to 100% in an insurance company through automatic route.
Closing the Float Gap
FDI limit will aid the offer for sale (OFS) in LIC, a large stock which commands a market cap of around Rs 5.6 lakh crore. The OFS is required to help the company meet the minimum public shareholding norms.
In May 2024, the Sebi gave three more years or till May 16, 2027 to LIC to achieve a minimum public shareholding of 10%. The Sebi norm mandated that listed firms have a minimum 10% public holding within two years of listing. The public float in LIC is just 3.5% after the government sold the stake in May 2022 to raise Rs 20,516 crore.
For insurance Intermediaries including insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third party administrator, Surveyors and Loss Assessors, managing general agents, insurance repositories and such other entities the FDI limit if 100% under automatic route,
The government has on December 21, 2025 already notified the changes in Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the Insurance Regulatory and Development Authority Act, 1999 brought through Sabka Bima Sabki Raksha (Amendments of Insurance Laws) Act 2025.
These changes among other things raised FDI in insurance companies to 100% from 74%.
Regulatory Guardrails
In an Indian Insurance Company having foreign investment, at least one among the Chairperson of its Board, its Managing Director and its Chief Executive Officer, shall be Resident Indian Citizens, the Press Note said.