Govt raises FDI cap in insurance to 49 percent

New Delhi: After allowing FDI in multi-brandretail, the government today approved a hike in foreigninvestment cap in insurance sector to 49 percent, meeting along standing demand of the industry and its regulator IRDA.

The Cabinet, headed by Prime Minister Manmohan Singh,approved an amendment to the Insurance Laws (Amendment) Bill,2008, that will raise the Foreign Direct Investment (FDI) inthe sector from 26 per cent to 49 percent.

Announcing the decision taken by the Cabinet, FinanceMinister P Chidambaram said the amendments will be presentedin the ensuing Winter session of Parliament.

Chidambaram said though the Parliamentary StandingCommittee, headed by BJP Leader Yashwant Sinha, hadrecommended retaining FDI cap at 26 percent, the governmentwent for the higher cap so as “to meet the growing capital requirement of insurance companies”.

Max Life Insurance MD Rajesh Sud said, “this would havebeen an opportunity to allow foreign investors to participatein the life insurance, since they are also a source oflong-term capital, particularly in view of potential IPOs of these companies”.

IRDA Chairman J Hari Narayan had yesterday pitched forraising the FDI cap saying that the sector needed huge capitalfor expansion.The Cabinet also approved foreign re-insurers to openbranches only for re-insurance business in India.

Suchbranches would be prohibited from investing directly orindirectly outside India the funds of policyholder.The amended bill has also pegged the capital requirementof health insurance companies at Rs 50 crore as against Rs 100crore for general insurers.

PTI