Govt Set to Hike FDI Limit for Insurance Sector to 100%
Finance Minister Nirmala Sitharaman announced on Saturday that the government plans to increase the foreign direct investment (FDI) limit in the insurance sector to 100%, as part of a series of new-generation financial sector reforms.
New Delhi: Finance Minister Nirmala Sitharaman announced on Saturday that the government plans to increase the foreign direct investment (FDI) limit in the insurance sector to 100%, as part of a series of new-generation financial sector reforms.
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Details of the FDI Limit Increase
Presenting the Budget for 2025-26, the finance minister confirmed that the FDI cap for the insurance sector would be raised from the current 74% to 100%. The enhanced limit will apply to companies that invest the entire premium amount in India. Additionally, the government plans to review and simplify the current regulatory conditions and guardrails associated with foreign investment in the sector.
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Legislative Amendments Required
To implement this change, the government will need to amend several key laws, including the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the Insurance Regulatory and Development Authority Act of 1999. These amendments will pave the way for foreign investments to increase in the insurance market.
Impact on the Insurance Sector
The proposed FDI hike is expected to bring more players into the sector, enhancing insurance penetration across the country and creating more job opportunities. Currently, there are 25 life insurance companies and 34 non-life or general insurance firms operating in India, including companies such as Agriculture Insurance Company of India Ltd and ECGC Ltd.
FDI Changes in Recent Years
This move follows previous increases in the FDI cap in the insurance sector. In 2021, the government raised the FDI limit from 49% to 74%, and in 2015, it was increased from 26% to 49%. Notably, the government had already allowed 100% foreign direct investment in insurance intermediaries earlier.
