Narendra Modi led NDA Govt Cabinet Clears 49% FDI in insurance with Indian control Thursday July 24,2014

Narendra Modi led NDA Govt Cabinet on Thursday July 24,2014 approved 49 %foreign investment in insurance companies through the FIPB route ensuring management control in the hands of Indian promoters.

The Cabinet Committee on Economic Affairs has approved raising of FDI cap in insurance sector to 49 % from 26 %, after a meeting of the CCEA, headed by Prime Minister Narendra Modi. 

The approval of the Cabinet Committee on Economic Affairs (CCEA) comes with the rider that management control in insurance companies will remain in the hands of Indian promoters, and all investment proposals beyond 26 per cent will have to be approved by the Foreign Investment promotion Board. 

The FDI cap has been raised to meet the growing capital requirements of the insurance companies and is expected to pave the way for another Rs 25,000 crore to flow into the sector

 

With the Cabinet approving the amendments to the long pending Insurance Laws (Amendment) Bill, it will now be taken up by Parliament. 

Note

The proposal to raise FDI cap has been pending since 2008 when the previous UPA government introduced the Insurance Laws (Amendment) Bill to hike foreign holding in insurance joint ventures to 49 %from the existing 26 %

However, the Bill could not be taken up in the Rajya Sabha because of opposition from several political parties, including the BJP.

The insurance sector was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999 (IRDA Act, 1999).

This Act permitted foreign shareholding in insurance companies to the extent of 26 per cent with an aim to provide better insurance coverage and to augment the flow of long term resources for financing infrastructure.