The insurance bill was passed by the Rajya Sabha on Thursday, paving the way for foreign companies to raise their stake in domestic insurance companies to 49 per cent. The passage of the bill is being hailed as a big positive for the country as it increases India's visibility among foreign investors.
Industry captains have welcomed the move with open arms, as it bolsters hopes that the government may be able to push other key reform legislations in the Parliament, despite the Narendra Modi government being in minority in the Upper House.
Chanda Kochhar, managing director and CEO, ICICI Bank
I think it's long awaited. So it's a very welcome move. First of all it conveys this big signal and this big message that the government is continuing to push all the reforms and we are on the path for reforms.
For the insurance sector it could mean that you could attract more foreign capital - it's better for the growth of the insurance sector.
The penetration of insurance itself is low in the country so that would go up. Secondly there is possibility of even indoor companies which may or may not need more capital there's possibility for foreign investments coming in to substitute some of the Indian holdings so I think in that sense taking into account the existing shareholding as well as the growth requirements, the amount of money could be large.
There is life, there is non-life, there is health and each one of these companies would grow further so I think it's a potential that can really unleash a lot foreign investment coming in and as I said this is an even bigger signal to say that the country is moving towards the path of reforms.
Analjit Singh, founder and chairman, Max India Group
For me this is actually the second best decision, our government could have taken on the business front. I will still say in terms of messaging to the outside world a lot of neutralising on retrospective tax amendment on tax I would still rate as number 1, in terms of giving a right signal.
But this is absolutely the second best and a great decision the country has taken so at the country level you can certainly expect capital inflows which will happen for even the profitable companies, the four or five that we are. It will encourage us to invest more risk-based capital for M&As (mergers and acquisitions) and the likes.
There are at least a raft of about 15 insurance companies where their existing partners are looking to up their stake. For sure there are at least four or five companies on the life side that are looking to make an entry into India.
On the sector you can be sure about improved penetration. For the Max Group we are actually in rather a unique position because we don't have per se an obligation to offer this higher ceiling to our existing partner.
They are obviously welcome to subscribe and complete with the other multiple offers and opportunities we have so all round we are in a great position both from a country perspective and a Max Group perspective.
This is certainly something we have been waiting for a long time so yes there will be listing (in the stock markets) and that will encourage inflows and so on so forth. So in that process, if some promoter, some sponsor up their stake reduce their stake, that's part of the business game.
You will also see new innovation in products because lot of the policy matters have also been played up and we hope that IRDA (Insurance Regulatory Development Authority) will work with the sector to allow us better, faster approach to run business, so all of that will tantamount in improved penetration.
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