Finance Minister Nirmala Sitharaman on Monday introduced a Bill in Rajya Sabha that seek to amend the Insurance Act to pave the way for 74 percent foreign direct investment (FDI) in the sector.
The Union Cabinet on Wednesday had given its nod for amendments in the Insurance Amendment Bill 2021.
Finance Minister Sitharaman introduced the Bill for amendments in the Insurance Act, 1938.
Currently, the permissible FDI limit in the life and general insurance stands at 49 percent with ownership and management control with Indian.
Sitharaman presenting the Union Budget for 2021-22 had said, "I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49 percent to 74 percent in insurance companies and allow foreign ownership and control with safeguards."
Under the new structure, the majority of directors on the board and key management persons would be resident Indians, with at least 50 percent of directors being independent directors, and specified percentage of profits being retained as a general reserve.
She had also said that for investor protection, an investor charter would be introduced as a right of all financial investors across all financial products.
It was in 2015 when the government hiked the FDI cap in the insurance sector from 26 percent to 49 percent. Increase in FDI will help improve life insurance penetration in the country.
Life insurance premium as a percentage of GDP is 3.6 percent in the country, way below the global average of 7.13 percent, and in case of general insurance, it is even worse at 0.94 percent of GDP, as against the world average of 2.88 percent.