Finance Minister has already given her approval and announced in the Budget. Now we will prepare a draft bill with the help of the law ministry. Thereafter, the draft bill will be sent to the Cabinet for approval. The intent of the DFS is to get the bill introduced during the current Budget session, said Financial Services Secretary M Nagaraju
New Delhi: The finance ministry will soon send the draft bill seeking to increase FDI limit in the insurance sector to 100 per cent to the Union Cabinet for its approval, Financial Services Secretary M Nagaraju said on Monday.
“Finance Minister has already given her approval that was announced in the Budget. Now, we will prepare a draft bill with the help of the Law Ministry,” he said in an interaction with media here.
Thereafter, the draft bill will be sent to the Cabinet for approval.
The intent of the Department of Financial Services (DFS) is to get the bill introduced during the current Budget session, he said.
Finance Minister Nirmala Sitharaman in her Budget speech proposed to raise the foreign investment limit to 100 per cent from existing 74 per cent in the insurance sector as part of new-generation financial sector reforms.
“This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified,” she had said.
So far, the insurance sector has attracted Rs 82,000 crore through FDI.
To enhance the FDI limit, the government will have to bring amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999.
The bill will also simplify certain procedure and rules.
The Insurance Act 1938 serves as the principal Act to provide the legislative framework for insurance in India.
It provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, shareholders and the regulator — Insurance Regulatory and Development Authority of India (Irdai).
The entry of more players in the sector would not only push penetration but also result in greater job creation across the country.
The proposal of the government to increase the foreign direct investment (FDI) limit in the insurance sector will help attract more overseas players in the sector, experts say.
They said that 100 per cent FDI will attract substantial foreign capital and will lead to improved technological interventions and advancements in the country.
“With international competitors entering the country, consumers can expect better products and services, empowering them with more choices tailored to their needs,” Aatur Thakkar, Co-founder and Director of Alliance Insurance Brokers, said.
Thakkar added that the provision of health insurance specifically for gig workers addresses a significant gap in coverage for this growing workforce segment, ensuring that they have access to essential healthcare services and improving overall public health outcomes.
Finance Minister Nirmala Sitharaman on Saturday announced a social security scheme for one crore gig workers engaged with online platforms and said the government will provide them identity cards and facilitate their registration on the e-Shram portal.
She also proposed to raise the foreign investment limit to 100 per cent in the insurance sector as part of new-generation financial sector reforms.
Debashish Banerjee, Partner at Deloitte India, said the FDI limit to 100 per cent will help a lot of foreign companies to stay foot in India and bring in competition which in turn should help the policyholder at large.
“Above this, they would bring in global innovation and their century-old experiences that will boost digital and technological advancement in the industry,” he said.
Rudra Kumar Pandey, Partner at Shardul Amarchand Mangaldas & Co, said the move aims to bring in more FDI, increase competition, and infuse more capital, resources and expertise into the sector which will enable innovative solutions, greater penetration of insurance and effective practices of risk management in the sector.
Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India. These include companies like Agriculture Insurance Company of India Ltd and ECGC Ltd.
The FDI limit in the insurance sector was last raised — from 49 per cent to 74 per cent — in 2021.
In 2015, the government had hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent.