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IRDA Favours Hike in FDI Ceiling for Insurance Sector to 49 Percent

Wednesday, 03 October 2012, 23:10 IST

New Delhi: Insurance regulator Irda favoured increase in foreign direct investment in the sector to 49 percent, saying it requires big investments for growth.

"Absolutely (in favour of hike in FDI limit). I do think unless we go for 49 percent, we will not have the kind of capital required to underpin the growth of insurance industry," Insurance Regulatory and Development Authority (Irda) Chairman J Hari Narayan said on the sidelines of a CII event here.

"This sector requires lot of money, so unless we enable inflow... Look at it, in banks it (FDI) is 74 percent. In Asset Management Companies, 100 percent. I do not see why, in insurance companies, it should be 26 percent. We should increase that," he said.

Foreign Direct Investment (FDI) in the insurance sector is capped at 26 percent.

With the government taking policy reform initiatives last week, especially allowing FDI in multi-brand retail and aviation sectors, there is expectation that the limit for the insurance industry may be raised as well.

However, the recent decision led to political uncertainty with Trinamool Congress, a key ally of the UPA, quitting the government.

The Insurance Laws (Amendment) Bill has been pending before Parliament for about 4 years as there has been no consensus among political parties on the issue of raising the FDI limit to 49 percent.

Following pressure from key allies, the government in May this year had postponed a decision on raising the FDI limit in the insurance sector to 49 percent.

The Insurance Bill, which was tabled in the Rajya Sabha in 2008, proposed to increase the FDI limit in the insurance sector to 49 percent, but Parliamentary Standing Committee on Finance wanted it to be retained at the current level of 26 percent.

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