'FDI Insurance Rules Could Have Been Simpler'

Furthermore, FDI also includes investment by foreign venture capital investors and portfolio investments - investments in the equity share of an Indian insurer by foreign institutional investors, foreign portfolio investors, Non-Resident Indians, qualified foreign investors and other eligible portfolio investor entities or persons in accordance with provisions of FEMA Regulations, 2000.

"Thus, for reckoning the 49 percent limit all the above would be aggregated," Varadarajan said.

However in case of a bank allowed to function as an insurance intermediary, the foreign equity investment caps applicable in that sector (banking) shall continue to apply, subject to the condition that the revenues of such entities from their primary (i.e. non-insurance related) business must remain above 50 percent of their total revenues in any financial year.

Industry officials told IANS that the notification has aligned the definition of control of Indian insurance company with that of the insurance ordinance issued earlier.

"This will put into difficulty some of the insurers where the foreign joint venture partner is in the driver's seat with the Indian promoter being a 'passive' investor," a senior industry official told IANS.

The rules defines Indian control of an Indian insurer to mean control by resident Indian citizens or Indian companies, which are owned and controlled by resident Indian citizens.

The rules also defines the term 'Indian ownership' of an Indian Insurance Company to  mean more than 50 percent of the equity capital in it is beneficially owned by resident Indian citizens or Indian companies, which are owned and controlled by resident Indian citizens.

"Thus, the rules have cleared the cobweb in regard to the import and purport of 'Indian owned and controlled' conundrum," Varadarajan said.
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