Cabinet expected to retain FDI cap in insurance sector at 26%

Foreign insurers and their domestic partners have been demanding an increase in the FDI cap to 49% to fund business expansion. The Union cabinet is expected to approve the amended Insurance Laws Bill retaining FDI in insurance at 26%. It is also expected that the bill will be tabled in the Parliament in the current Budget session.

The government had introduced the Insurance Laws (Amendment) Bill in the Rajya Sabha in 2008 recommending that the FDI cap in the sector be raised to 49%, which was later sent to the Parliament’s standing committee. The standing committee however did not agree with the provision and stated that it was ‘without any sound and objective analysis of the status of the insurance sector following liberalisation’.

It further remarked that the ‘Increased role of foreign capital may lead to the possibility of exposing the economy to the vulnerabilities of the global market, flight of capital outside the country and also endangering the interest of the policy holders’.

Foreign insurers and their domestic partners have been demanding an increase in the FDI cap to 49% to fund business expansion. The panel, headed by senior BJP leader Yashwant Sinha, has agreed to the need of bringing in comprehensive changes in the outdated laws governing the insurance sector.