FDI hike to 74% in insurance sector

Indian finance minister Nirmala Sitharaman’s recently announced in the annual budget that the FDI limit in insurance would be increased from 49 percent to 74 percent. This will enable expansion of the insurance sector, its penetration, its level of competition, and value for customers in terms of better products at lower cost.

Foreign inflows in insurance companies will also enable them to become more effective vehicles for household savings, creating long-term assets in the economy.

“I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49 percent to 74 percent in insurance companies and allow foreign ownership and control with safeguards,” said Sitharaman.

While this may bring in an initial thrust of foreign capital within the industry, participants in financial services sector say the decision may change the face of the Indian insurance industry in terms of technology, product offerings and resources, according to a report in the New Indian Express. Infusion of capital may also lead to faster growth, deeper penetration of the private sector across the country and employment generation in the sector.