The government may remove several procedural impediments in attracting foreign direct investment (FDI), and allow up to a 74% overseas stake in the insurance sector, two officials close to the development said.
The Budget, to be unveiled on 1 February, could contain policy directives facilitating FDI in various areas including insurance, reported Hindustan Times.

“After liberalising FDI in insurance intermediaries, the government is considering raising foreign investments in insurance companies. It is one of the key demands of various global investors. There are some views to initially increase the cap on the insurance company to 51%, which could be later raised to 74%. A final view will be taken by the competent authority,” one of the two officials said.

In February last year, the government had amended the FDI policy to allow 100% foreign investment in insurance intermediaries such as insurance agents, web aggregators of insurance policies and brokers. The FDI cap on insurance companies remained at 49%.

Experts said FDI cap in insurance companies was first raised from 26% to 49% in March 2016, whereas foreign investors are keen on majority control.

Mr Divakar Vijayasarathy, founder and managing partner at consulting firm DVS Advisors, said: “It’s high time the government raised the FDI limit in insurance from the current limit of 49% to 74%. Even the regulator has recommended such an increase.”

The COVID-19 pandemic has exposed the limited insurance coverage in India and the shortage of capital in the insurance sector, he said.


 

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