According to the ministry, it feels the proposal has suitable safeguards on foreign equity investment in the Indian insurance sector and thus it has sought for the approval for proposed amendment. “This is considered essential in light of the prevailing economic and insurance industry environment, and the sensitive nature of the subject of foreign equity investment,” the draft note said.

Soon after the new government came in to charge the finance secretary had chaired a meeting attended by the general insurance council, life insurance council and representatives of various insurance companies, on May 31, 2014. While there was unanimity on raising the FDI limit to 49 per cent considering the capital needs of the companies, there were suggestions to impose safeguards.

“Participants were also skeptical about restricting the enhanced foreign investment limits to certain areas of the insurance sector, like general insurance, with or without stipulations for mandatory provision of certain services like health insurance,” the note added. However, this has not been accommodated in the final amendment proposed in the draft Cabinet note.