Nov. 12 – The Union cabinet has concented to increase the limit for FDI in India's insurance sector from 26 percent to 49 percent. The bill will be introduced in Parliment for approval sometime in the near future.
According to the Economic Times, Finance minister P. Chidambaram announced that the Union Cabinet, had decided to introduce a comprehensive amendment bill. “The Union Cabinet gave its approval for introduction of the Insurance (Amendment) Bill, 2008, for amendment to Insurance Act 1938, General Insurance Business (Nationalisation) Act, 1972, and Insurance Regulatory and Development Act, 1999, in the Rajya Sabha (Council of States) on the basis of recommendations made by Group of Ministers,” Mr Chidambaram told the newspaper in early November. The bill is being introduced in the Rajya Sabha as it is not a money bill.
Through the changes, the government is seeking to ‘remove archaic and redundant provisions in the legislation’, which it hopes would provide more flexibility to IRDA to function effectively and efficiently. The move has received cheer from all quarters. IRDA (Insurance Regulatory and Development Authority) chairman J Hari Narayan told the Economic Times “If the insurance bill is passed, it will ensure the emergence of a more efficient insurance sector.”
The Indian insurance sector currently holds a total FDI of around Rs 2,500 crore. Once the cap on FDI is raised to 49 percent, the industry expects FDI to increase by 2.5 times, worth Rs 7,000 crore to flow in. Several foreign players have already expressed interest in owning a share of India's burgeoning insurance sector.
India has 21 life and 20 general insurers. Some joint ventures include Tata AIG, Bajaj Allianz, ICICI Prudential, HDFC Standard Life, Birla Sunlife, Max New York Life, Bharti AXA Life, IDBI Fortis, Aviva and Metlife India.