Centre may allow 74% FDI in insurance

New Delhi: In yet another big reform initiative aimed at bringing more capital into the insurance business, the Union government may soon open the sector to 74 per cent foreign direct investment (FDI) under the approval route to bring parity with the banking sector. The proposed changes in the FDI limit for insurance is part of another round of overhaul of the FDI policy that the government is looking to implement to make the policy progressive and less restrictive.

This has become important post Covid-19 outbreak. Currently, FDI up to 49 per cent is permissible in insurance under the automatic route with the condition that insurance company's ownership and control remains at all times in the hands of resident Indian entities. In banking, however, 74 per cent FDI is permitted with up to 49 per cent investment under automatic route while anything above that, under government approval route.

Sources said, like in banking, the government is now looking to raise FDI limit in insurance up to 74 per cent giving the control and management to the foreign investor. However, to ensure strong Indian presence in majority foreign owned and managed entity, the company may be mandated to appoint an Indian CEO. The decision on changes in the FDI limit could be announced by the Department of Promotion of Industry and Internal Trade (DPIIT) soon.

The Secretary, DPIIT Guruprasad Mohapatra, earlier told ISNS that there are always some policy considerations going on regarding several sectors, but refused to comment on specifics. The increase in FDI limit insurance could pave the way for foreign players, who were getting jittery without having the control in their Indian investment, to now bring in more capital, new technologies, new products and ensure better market penetration.