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U.S. seeks higher FDI cap in insurance
By agencies
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Thursday, 06 October 2005, 19:30 IST
NEW DELHI: The United States today asked India to increase the FDI limit in the Insurance sector to more than 50 percent and reduction in capital requirement for health insurance companies to below $22 million.
"The FDI cap should be raised above 50 percent within a short period so that foreign investors would have management control commensurate with their investment and the flow of FDI to the sector will increase," U.S. Ambassador to India David C Mulford said.
Demanding immediate redressal of policy issues, Mulford said there was an understanding that the FDI limit would be raised to 49 percent and many companies entered Indian market with this expectation.
"Failure to follow through in raising the cap is increasingly seen by investors as a breach of faith," he said, adding, "if India wishes to regain its credibility in the eyes of foreign investors this promise of 49 per cent FDI needs to be delivered sooner than later."
Till date, Indian insurance industry has attracted only $235 million foreign direct investment.
He said the current minimum capital requirement of $22 million for setting up a health insurance company is a significant barrier to entry, particularly when FDI is restricted to mere 26 percent.