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India will raise cap on FDI in insurance firms
The Indian government is pushing ahead with delayed plans to increase the cap on foreign direct investment in insurance companies to 49 per cent from 26 per cent and other reforms, the finance minister said on Friday.
- Reuters
- Published: 00:00 November 1, 2008
New Delhi: The Indian government is pushing ahead with delayed plans to increase the cap on foreign direct investment in insurance companies to 49 per cent from 26 per cent and other reforms, the finance minister said on Friday.
A bill will be introduced when parliament next meets in December, but time constraints mean it is unlikely to be approved in that session, Palaniappan Chidambaram said.
"These are comprehensive amendments to reflect the current need of the insurance industry," Chidam-baram told reporters.
"One of the clauses proposes that the FDI may be increased from 26 to 49 per cent for the company concerned." Private insurers have lobbied government to raise the FDI limit so that foreign insurers can infuse more capital by raising their stakes in Indian arms, which would help them grow faster.
The proposed change on ownership rules would not apply to state-run insurers where government is the sole owner. In 2005, Chid-ambaram announced plans to amend laws and allow a higher FDI cap but met stiff opposition from communist parties, who provided the coalition government with a majority until withdrawing support in June.
The government won a confidence vote in July, and afterwards policymakers said they would hasten reforms in banking, insurance and pensions.
Other proposed changes in insurance laws would help the country's largest insurer, Life Insurance Corp, raise its capital base to Rs1 billion ($20 million) from the present Rs50 million to meet regulatory requirements, Chidambaram said.
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 and IDBI Fortis.
Life insurers grew their business by 23.3 per cent to Rs930 billion in 2007-08 fiscal year, while general insurers posted growth of about 14 per cent growth in premium income at Rs298 billion.
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