NDA Govt approves Ordinance to Hike FDI in Insurance to 49% Wednesday Dec 24,2014

The NDA Government on Wednesday Dec 24,2014 approved promulgation of an Ordinance to hike Foreign Direct Investment (FDI) cap in the insurance sector to 49 per cent from 26 per cent, as the legislation could not be passed in the Parliament session that ended on Tuesday.

The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion despite being approved by the Select Committee of the Upper House because of the uproar by opposition parties over the conversion and other issues.

The NDA Government has blamed political obstructionism for the disruption of Rajya Sabha, where the ruling NDA does not have a majority.

The Cabinet has cleared the Ordinance on insurance sector,” sources said after the meeting of the Union Cabinet headed by Prime Minister Narendra Modi

The Insurance Bill, which has been pending since 2008 in the Rajya Sabha, seeks to increase the composite foreign investment limit in insurance companies to 49 % from current level of 26 %

The 49 % cap would include both FDI and foreign portfolio investments. 

The proposed hike in foreign investment limit to 49 % in the insurance sector has potential to attract up to USD 7-8 billion (about Rs 50,000 crore) from overseas investors, giving a major boost to the segment. 

The total capital deployed in the private life insurance sector is close to Rs 35,000 crore. At FDI at 26 per cent, foreign equity is close to Rs 8,700 crore. 

There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in general insurance business. In addition, GIC is the sole national reinsurer.