Cabinet May Announce Increase In FDI Limit In Insurance Sector To 100% On Friday
Finance Minister Nirmala Sitharaman, during the Budget presentation on Feb. 1, informed that the FDI limit for the insurance sector will be raised from 74% to 100%.
The Union Cabinet is set announce raising foreign direct investment limit in insurance sector from 74% to 100% as soon as Friday, Bloomberg News reported on Thursday. The proposal was floated by Finance Minister Nirmala Sitharaman in February.
The enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified, she had said.
With the increase in FDI limit from 74% to 100% for insurance companies, the Government aims to unlock the full potential of the Indian insurance sector, which is projected to grow at 7.1% annually over the next five years, outpacing global and emerging market growth, Sitharaman told lawmakers earlier this year.
"This is an enabling provision which will help the interested insurers to explore hiking the FDI percentage. Further, this will eliminate the need for foreign investors to find Indian partners for the remaining 26%, easing the process of setting up their operations in India, effectively increasing the number of insurers in the country," she said.
The government also expects removing the FDI cap will attract stable and sustained foreign investment, increase competition, facilitate technology transfer, and improve insurance penetration in the country. The move will require an amendment to the Insurance Act, 1938.
The Ministry of Finance has already issued a draft of the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025. The Insurance Laws (Amendment) Bill, 2024 remains to be introduced in the Parliament.
As per government data, foreign investors held 47.82% stake in life insurance companies at the end of 2024, 40.8% in private sector general insurers and 29.46% in private sector standalone health insurers.
Despite having 57 insurance companies (24 life insurers and 34 non-life insurers), penetration in India remains low. In FY24, insurance premium penetration was 3.7% of GDP, with life insurance at 2.8% and non-life at 0.9%, as per government data.
