InvestorQ : With the Insurance Act being amended, do you see the FDI into insurance coming in a big way into India?
indhumathi Sayani made post

With the Insurance Act being amended, do you see the FDI into insurance coming in a big way into India?

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1 month ago
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Let me clarify that there is still some time for the Insurance Act to be amended. The Union Cabinet has approved changes to the Insurance Act for increasing FDI limit in insurance to 74% from the current 49%. However, this still officially needs to be ratified in both houses of parliament by a majority vote before it can become law. However, considering the comfortable position of the NDA in both houses, that should be more of a formality.

This was one of the major announcements made by the finance minister, Nirmala Sitharaman in her budget speech on 01-February. However, the government has also clarified that this leeway will only be offered with adequate safeguards. Despite 74% FDI, the government has already clarified that majority of the directors on the board of the insurer would be resident Indians. Same applies to key management personnel or KMPS.

In addition, at least half the board will comprise of independent directors of repute. As of Mar-21, the total FDI in 23 life insurance companies stood at 37.41% and the 49% limit had been reached only in the case of 9 insurance companies. However, as Mr. Deepak Parekh had stated after the budget, the 74% level would be more attractive as it gives management control unlike the 49%. The FDI holding is much lower for non-life insurers. 

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