The Rajya Sabha has approved the bill to increase the FDI limit in the insurance sector from the present 49 percent to 74 percent. Replying to the discussion on the Insurance (Amendment) Bill, 2021, Finance Minister Nirmala Sitharaman said that foreign investment will help domestic long-term resources, which will be aimed at furthering the penetration of insurance in the country. The bill was passed by voice vote.
IRDAI detailed discussion: Sitharaman
Sitharaman said that the decision to increase the FDI limit to 74 percent has been detailed by the sector regulator IRDAI with stakeholders.
According to the bill, most of the directors and key management persons on the board will be from India, in which at least 50 per cent of the directors will be independent directors and a substantial percentage of the profits are being kept as general reserves. In 2015, the last time the government increased the FDI limit in the insurance sector from 26 per cent to 49 per cent.
Target to increase the reach of life insurance in the country: Sitharaman
The goal of increasing FDI is to increase the penetration of life insurance in the country. The life insurance premium in the country as a percentage of GDP is 3.6 per cent, which is lower than the global average of 7.13 per cent, and in the case of general insurance, it is worse, 0.94 per cent of GDP. The world average is 2.88 percent of it.
Finance Minister Nirmala Sitharaman said during the discussion that India has received FDI of Rs 26 thousand crore in the insurance sector after 2015, when the foreign investment limit was raised from 24 per cent to 49 per cent. Sitharaman said that insurance companies are facing the pressure of liquidity and this is the reason why the government is proposing to increase the FDI limit further.
(Input: PTI)