RBI permits FPIs, NRIs to invest up to 26 percent in insurance and allied activities

The Reserve Bank of India (RBI) has allowed overseas investors including FPIs and NRIs to invest up to 26 percent in insurance and allied activities through the automatic route. Foreign Portfolio Investors (FPIs) include all foreign institutional investors (FIIs), their sub-accounts and qualified foreign investors (QFI). However, overseas companies bringing in foreign investment, will have to obtain necessary licence from the Insurance Regulatory and Development Authority (IRDA) for undertaking prescribed activities.

Earlier, foreign investments under the automatic route were allowed only in insurance companies. Under the new norms FPIs and NRIs can invest up to 26 percent in insurance and allied activities such as broking, third party administrators and surveyors.

Over the past few years, the government has been liberalizing the foreign investment policy to attract maximum FDI into the country, which is crucial for economic development. The government has relaxed FDI norms in around 12 sectors, which include telecom, tea, pension and petroleum and natural gas among others. Despite government's various efforts to increase FDI, foreign investment during April-February FY14 has declined, which reflects the need to take more measures to improve the business environment in the country.