The Insurance Act, 1938 was last amended in 2015, which raised the FDI limit to 49 per cent, resulting in a foreign capital inflow of Rs 26,000 crore in the last five years.
The government has said applications for foreign direct investment in an insurance company promoted by a private bank will be cleared by the RBI and Irdai to ensure that the 74 per cent limit of overseas investment is not breached.
These changes were made by amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, according to the gazette notification issued by the Finance Ministry on August 19, 2021.
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“These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021,” it said.
Earlier in March, Parliament passed a bill to raise the foreign direct investment (FDI) limit in the insurance sector from 49 per cent to 74 per cent. The Insurance Act, 1938 was last amended in 2015, which raised the FDI limit to 49 per cent, resulting in a foreign capital inflow of Rs 26,000 crore in the last five years.
“Applications for foreign direct investment in private banks having joint venture or subsidiary in insurance sector may be addressed to the Reserve Bank for consideration in consultation with the Insurance Regulatory and Development Authority of India (IRDAI), in order to ensure that the limit of foreign investment applicable for the insurance sector as specified in serial number F. 8.1 and F. 8.2 is not breached,” the notification said.
An Indian insurance company having foreign investment would comply with the provisions under the Indian Insurance Companies (Foreign Investment) Rules, 2015, as amended from time to time and applicable rules and regulations notified by the Department of Financial Services or the Irdai from time to time, it added.
There are 24 life insurance companies and 34 general insurance firms operating in the country.