Union Cabinet raises FDI cap in insurance allows it in pension

By: admin
Updated: 04 Oct 2012 07:25 AM

In another round of big-ticket reforms, the Union Cabinet on
Thursday decided to raise the FDI cap in insurance sector to 49 per cent
and opening the pension sector to foreign investment.

While the Insurance Bill seeks to raise the FDI cap insurance sector to 49
per cent, from the 26 per cent at present, the proposal in the Pension
Fund Regulatory and Development Authority (PFRDA) Bill seeks to open up
the pension sector to Foreign Direct Investment (FDI). Watch: Union
Cabinet raises FDI cap in insurance

A decision in this regard was taken by the Union Cabinet headed by Prime
Minister Manmohan Singh.

"The benefit of this amendment will go to the private sector insurance
companies which require huge amount of capital and that capital will be
facilitated with increase in FDI to 49 per cent," finance minister P
Chidambaram told reporters.

The minister also clarified that state-run insurance companies will remain
in the public sector.

With the Cabinet approving the proposal, the Insurance Laws (Amendment)
Bill is likely to be taken up by Parliament for passage in the forthcoming
Winter Session.

The Bill introduced in Rajya Sabha in December 2008 proposes to increase
the foreign direct investment (FDI) limit in the insurance sector to 49
per cent.

However, the Standing Committee on Finance in its report on the Bill had
rejected the proposal to hike the FDI cap in the insurance sector to 49
per cent, saying this may not have the desired effect and could expose the
economy to global vulnerability.

The panel, headed by senior BJP leader Yashwant Sinha, though had agreed
with the need to bring in comprehensive changes in the archaic laws
governing the insurance sector.

The Insurance sector was opened up for private sector in 2000 after the
enactment of the Insurance Regulatory and Development Authority Act, 1999
(IRDA Act, 1999).

This Act permitted foreign shareholding in insurance companies to the
extent of 26 per cent with an aim to provide better insurance coverage and
to augment the flow of long term resources for financing infrastructure.

Watch: Union
Cabinet raises FDI cap in insurance
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address rally for FDI