Nod to 49% FDI in Insurance to Drive Capital Infusion: India Inc

Welcoming the Cabinet's approval to raise foreign direct investment (FDI) ceiling in insurance, India Inc on Thursday said the move will drive capital infusion in the cash-starved sector by attracting investments from foreign players, enhance insurance cover and push firms to provide long-term savings vehicles.

"We welcome the Cabinet's approval to increase FDI limit in insurance from 26 to 49 per cent with full Indian management and control, as it will help in attracting the much needed long term capital for the sector which can have multiplier effect on the state of economy, especially in meeting the huge infrastructure financing requirements," said Chandrajit Banerjee, director general of the Confederation of Indian Industry.

Earlier in the day, the Cabinet approved 49 per cent FDI in insurance companies through the Foreign Investment Promotion Board, or FIPB, route ensuring management control in the hands of Indian promoters. (Read full story)

The proposed FDI cap increase will hopefully drive capital infusion in the insurance sector and revive growth, said Ficci Insurance Committee chairman Amitabh Chaudhry, who is also managing director and chief executive of HDFC Life Insurance.

(Also read: How higher insurance FDI limit could benefit you)

"Given that the (insurance) industry has witnessed muted growth in recent times, this move will further enable the industry to serve millions of under-insured Indians, improve life and health insurance coverage and provide long term savings vehicles," he added.

With the Cabinet approving the amendments to the long pending Insurance Laws (Amendment) Bill, it will now be taken up by Parliament.

Liberalisation in the sector will send an important signal to the global investors about the earnestness of the Narendra Modi government to go ahead with the financial sector reforms, said Rana Kapoor, president of industry body Assocham.

"FDI in insurance sector will also strengthen the capital flows in the coming time... It would go a long way to rebuild investment sentiments in the country," PHD Chamber of Commerce & Industry president Sharad Jaipuria said.

The proposal to raise FDI cap has been pending since 2008 when the previous UPA government introduced the Insurance Laws (Amendment) Bill to hike foreign holding in insurance joint ventures to 49 per cent from the existing 26 per cent.