Government To Increase 49 Percent FDI In Insurance


NEW DELHI: The government is all set to increase foreign direct investment limit in the insurance sector to 49 per cent from the current 26 per cent even though a rider that voting right of the overseas partner will be restricted at 26 per cent.

The government has also proposed that majority of the company’s shareholders will have to be Indian nationals. In addition to that the foreign shareholders will have no voice in the appointment of the CEO of the insurance company. While, the long-pending Insurance Laws Amendment Bill, 2008, proposes an increase in foreign holding in insurance joint ventures to 49 per cent from the existing 26 per cent with corresponding voting rights, the finance ministry, in a draft Cabinet note dated June 27, 2014, has proposed to include an official amendment to the existing Clause 3, and that is to incorporate certain ‘safeguards or restrictions’ while enhancing the FDI cap.

The proposal to hike the FDI cap in the sector was first unresolved by the previous UPA government and has been pending in the Rajya Sabha since 2008. “The voting rights of such foreign shareholders shall not exceed 26 per cent in the aggregate and the CEO of the said Indian insurance company, to be appointed by its Indian shareholders …. and the majority of the company’s directors shall be Indian nationals,” said the Cabinet as reported in Financial Express.