Finmin to Ex­plore Op­tions of Rais­ing Funds in In­sur­ance

In­creas­ing FDI in the sec­tor is one among the many op­tions for rais­ing funds

The Economic Times - - Economy - OUR BUREAU

The fi­nance min­istry will look at op­tions other than a higher limit for for­eign di­rect in­vest­ment (FDI) to al­low in­sur­ance com­pa­nies to raise funds, in­di­cat­ing that in­creas­ing the FDI limit for the sec­tor may not be the new govern­ment’s top pri­or­ity. The pre­vi­ous govern­ment had un­suc­cess­fully tried to build con­sen­sus on in­creas­ing the FDI limit in in­sur­ance to 49% from 26%. “We have to look afresh at this is­sue whether 49% (FDI) or there could be some other in­stru­ments with­out rais­ing it to 49%. All these is­sues we have to ad­dress and then will come back to govern­ment,” fi­nan­cial ser­vices sec­re­tary GS Sandhu said on Thurs­day af­ter mak­ing pre­sen­ta­tions to fi­nance min­is­ter Arun Jait­ley. The In­sur­ance Bill has been with the Ra­jya Sabha since 2008. In Oc­to­ber 2012, the Cab­i­net had cleared 49% for­eign in­vest­ment in the in­sur­ance sec­tor. How­ever, Par­lia­ment’s stand­ing com­mit­tee on fi­nance headed by for­mer fi­nance min­is­ter and BJP leader Yash­want Sinha had sug­gested that the cap be kept at 26%. If the govern­ment de­cides to keep the FDI cap at 26% in in­sur­ance, the limit will be ap­pli­ca­ble to the pen­sion sec­tor as well. Re­spond­ing to a spe­cific ques­tion on whether FDI in­crease in in­sur­ance sec­tor was com­pletely ruled out, Sandhu said the govern­ment was ex­am­in­ing the other op­tions. “Other op­tions are whether we need to have this in all kinds of in- surance or we can re­strict it to cer­tain cat­e­gory of in­sur­ance to start with,” Sandhu clar­i­fied, adding, “We are not rul­ing out (rais­ing FDI cap), nei­ther are we say­ing ‘yes’.” “First we will see whether we need to take up this whole hog in all cat­e­gories of in­sur­ance or we can start in some par­tic­u­lar (cat­e­gory). Then we have to talk to ma­jor play­ers and see what could be the other op­tion apart from this,” he said. Sandhu said the In­sur­ance Bill, which seeks to raise FDI in in­sur­ance from 26% to 49%, may be tabled in the budget ses­sion of Par­lia­ment if the govern­ment man­aged to ad­dress these is­sues. Sandhu also said that the Re­serve Bank of In­dia would is­sue fresh norms for dif­fer­en­ti­ated li­cences in the next four months. “Hope­fully, in next few months, RBI will start invit­ing ap­pli­ca­tions... RBI will take four-five months for pre­par­ing the new set of guide­lines for on-tap and for dif­fer­en­ti­ated banks,” fi­nan­cial ser­vices sec­re­tary GS Sandhu told the me­dia. RBI had last month given two full bank li­cences to IDFC and Band­han Fi­nan­cial Ser­vices out of 25 ap­pli­ca­tions. “RBI will take four months to draft new guide­lines and then in­vite ap­pli­ca­tions,” Sandhu said.

HOLD­ING CO & NPA RES­O­LU­TION

Sandhu also said the fi­nan­cial ser­vices di­vi­sion pre­sented the sug­ges­tions on hold­ing com­pany for state-run banks, res­o­lu­tion of non-per­form­ing as­sets and al­low­ing bank fi­nance to do­mes­tic com­pa­nies for tak­ing over sick com­pa­nies to the new fi­nance min­is­ter. The bank­ing di­vi­sion has been con­sid­er­ing a hold­ing com­pany of all state-run banks to have a sin­gle mech­a­nism to en­able the govern­ment to bet­ter man­age bank’s cap­i­tal needs.

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