The Telegraph
Thursday , July 24 , 2014
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Cabinet clears higher FDI of 49% in insurance, but mandates Indian control

New Delhi, Jul 24 (PTI): The Cabinet on Thursday allowed a higher foreign direct investment level in insurance of 49 per cent, against 26 per cent at present, with a rider that management control will remain in the hands of the Indian promoters.

There are about two dozen private sector insurance firms both in life and non-life segment, and the higher limit could attract as Rs 25,000 crore by way of foreign funds.

The proposal for a higher limit of 49 per cent, pending since 2008, is expected to attract long-term capital, besides improving the overall investment climate.

This is the first major reform initiative by the Narendra Modi-led National Democratic Alliance government, and has raised expectations of a further relaxation of FDI norms in sectors like defence and railways.

”The CCEA has approved raising of FDI cap in insurance sector to 49 per cent from 26 per cent,” sources said, adding that all investment proposals beyond 26 per cent will have to be approved by the Foreign Investment Promotion Board and Indian promoters will continue to have the control of the management.

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

According to consultants KPMG, the higher limit could fetch investments up to Rs 25,000 crore.

”Once there is proper clarity on the interpretation of control by Indian promoter, the additional foreign capital expected across life, health and general insurance companies is between Rs 20,000 and 25,000 crores,” KPMG (India) Partner Shashwat Sharma said.

After the Bill is passed by Parliament the same norms for foreign investment will apply to the pension sector as well.

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