INSURANCE
Finance Minister proposes to raise FDI limit to 100% in insurance sector
Feb-03-2025

As part of new-generation financial sector reforms, Finance Minister Nirmala Sithraman has proposed to raise the Foreign Direct Investment (FDI) limit to 100 per cent in the insurance sector from current 74 per cent. She said ‘This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified’. To enhance the FDI limit, the government will have to bring amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999.

She said the draft Bill is also going to simplify certain procedure and rules. The draft Bill will be tabled in Parliament soon. The Insurance Act 1938 serves as the principal Act to provide the legislative framework for insurance in India. It provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, shareholders and the regulator -- Insurance Regulatory and Development Authority of India (Irdai).

The entry of more players in the sector would not only push penetration but result in greater job creation across the country. Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India. These include companies like Agriculture Insurance Company of India and ECGC.

The FDI limit in the insurance sector was last raised -- from 49 per cent to 74 per cent -- in 2021. It was in 2015 when the government hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent. The government earlier allowed 100 per cent foreign direct investment in insurance intermediaries.


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