Sitharaman Announces 100% FDI in Insurance to Boost Growth, Jobs, and Efficiency

By siliconindia  |  Tuesday, 12 August 2025, 05:24:06 PM IST

Sitharaman Announces 100% FDI in Insurance to Boost Growth, Jobs, and Efficiency
  • FDI limit in Indian insurance companies raised from 74% to 100% to attract more investors and create jobs.
  • Increased FDI will drive advanced technology adoption, faster claims processing, and reduce costs in the insurance sector.
  • Strong regulatory safeguards remain in place to protect policyholders and ensure financial stability.
During the Monsoon Session of Parliament on August 12, 2025, Finance Minister Nirmala Sitharaman outlined key advantages of increasing the Foreign Direct Investment (FDI) limit in Indian insurance companies from 74% to 100%. The move, announced earlier in the Union Budget 2025, aims to attract more players into the insurance market and boost employment opportunities, she said.
Speaking in the Rajya Sabha, Sitharaman emphasized that allowing 100% FDI would encourage advanced technologies and automation within the insurance sector. These innovations are expected to accelerate underwriting and claims processing, thereby improving turnaround times, reducing operational costs, and enhancing overall sector efficiency.
The Finance Minister reiterated that the Insurance Act of 1938 continues to govern investments by insurers with a strong focus on safety, liquidity, and regulatory oversight aligned with policyholder interests. The Act specifies the timing, manner, conditions, and types of instruments in which insurers can invest. It mandates that a defined percentage of funds be invested in government securities and other approved securities as per guidelines from the Insurance Regulatory and Development Authority of India (IRDAI).
Sitharaman highlighted a crucial provision of the Act that prohibits Indian insurance companies from investing any funds outside India, requiring all insurer funds to be invested domestically. This safeguards the country’s financial stability while protecting policyholders.
To ensure ongoing financial security, the Insurance Act requires insurers to maintain assets exceeding liabilities by at least 50% of the minimum capital amount. Additionally, IRDAI mandates insurers to uphold a solvency ratio of at least 150% at all times, providing a cushion to cover liabilities and policyholder claims.
In cases where an insurer acts against policyholders’ interests, IRDAI holds the authority to supersede the company’s Board and appoint an Administrator to manage the insurer’s affairs. This regulatory oversight ensures transparency, fair business practices, solvency monitoring, and efficient grievance redressal mechanisms.
Sitharaman also noted that insurance companies operate under the governance of the Companies Act, 2013, requiring compliance on all governance matters. The Indian Insurance Companies (Foreign Investment) Rules, 2015, further regulate aspects such as dividend payments, profit repatriation, and Board composition.
“These provisions and mechanisms provide adequate checks and balances to safeguard insurance business conduct in India”, the Finance Minister affirmed.
Separately, Sitharaman informed Parliament that the maximum continuous tenure of directors in cooperative banks, excluding Chairpersons and Whole-time Directors, has been extended from eight to ten years. This amendment to Section 10A of the Banking Regulation Act, 1949, took effect on August 1, 2025, aiming to strengthen governance in cooperative banking institutions.
The announcement marks a significant step in modernizing the insurance sector while maintaining robust regulatory safeguards for policyholders and investors alike.

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