The Rajya Sabha has recently passed the Insurance (Amendment) Bill, 2021 which seeks to amend the Insurance Act, 1938. The amendment will now increase the limit of foreign investment allowed in Indian insurance companies. The Bill provides to increase the Foreign Direct Investment limit from existing 49% to 74%. It also has a provision for the removal of restrictions on ownership and control of the insurance companies.
Replying to a discussion, Indian Finance Minister Nirmala Sitharaman said that a higher FDI limit of 74% is not a compulsion for every insurance company, as it sets only an upper limit. She further clarified that increasing the limit doesn’t mean automatic foreign investment to that level to all companies, and every company will decide the limit of investment.
According to Sitharaman, the hike in foreign investment will help meet the growing capital requirements of insurance companies as they are facing liquidity pressure. The move will help in the deep penetration of insurance cover into the country and will also ensure insurance inclusion.
