Rajya Sabha clears Bill allowing 74% FDI in insurance

The Upper House cleared the Bill by a voice vote after finance minister Nirmala Sitharaman responded to queries raised by protesting Opposition party members. Sitharaman stated foreign investment will supplement domestic long-term resources in ensuring further insurance penetration within the nation.

Sitharaman assured that the decision to increase the foreign investment was taken after detailed consultations by the Insurance Regulatory and Development Authority (IRDAI) with stakeholders.

The decision to grant control and higher foreign ownership rights comes with safeguards. As per this, majority of directors on the Board and key management persons in health and general insurance firms would be resident Indians, with a minimum of 50% of directors being independent directors. The government will also specify a particular percentage of profits to be retained as general reserve.

Insurance sector was opened up for foreign direct investment of 26% in year 2000. The government last raised the FDI cap from 26% to 49% in 2015.

During the discussions, members of the Opposition raised slogans and trooped into the well of the House resulting in adjournment of the House.

“In order to achieve the objective of government’s FDI policy of supplementing domestic long-term capital, technology and skills for the growth of the economy and the insurance sector, and thereby enhance insurance penetration and social protection, it has been decided to raise the limit of foreign investment in Indian insurance firms from the prevailing 49% to 74%,” the Bill stated about the objectives it seeks to achieve.