Rajya Sabha clears bill to hike FDI in insurance to 74%

NEW DELHI: Rajya Sabha on Thursday cleared the Insurance (Amendment) Bill 2021 that raises foreign direct investment (FDI) in insurance from 49% to 74%.

The Upper House cleared the Bill by a voice vote after finance minister Nirmala Sitharaman responded to queries raised by protesting Opposition party members.

Sitharaman said higher foreign investment will help insurance companies meet their growing capital requirements and help in furthering insurance penetration in the country.

When more capital comes and there are more insurance players, it leads to higher competition, better negotiated premiums and better insurance packages for the Indian insurance policy buyers, the minister said in her reply.

Sitharaman assured that the goal was to further the process of economic reforms and that the decision to increase foreign investment ceiling was taken after consultations that Insurance Regulatory and Development Authority (Irdai) held with stakeholders. “Insurance is a highly regulated sector. Policy holders’ money will have to be invested in India only. It cannot cross our boundaries,” the minister said.

The decision to grant control and higher foreign ownership rights comes with safeguards. As per this, the majority of directors on the board and key management persons in health and general insurance companies would be resident Indians. This will make sure that every law of the land will be applicable to them. Also, at least 50% of directors on the board must be independent directors. The government will also specify a particular percentage of profits to be retained as general reserve.

Insurance sector was opened up for foreign direct investment of 26% in year 2000. The government last raised the FDI cap from 26% to 49% in 2015.