The Lok Sabha approved a bill on Monday which would increase the limit on foreign direct investment (FDI) in the insurance industry from 49 percent to 74 percent. On Monday, the bill was approved by voice vote.
Last week, the Rajya Sabha passed the Insurance (Amendment) Bill, 2021.
In favour of the bill, FM Nirmala Sitharaman asserted that boosting the FDI limit in the insurance industry would assist insurers in raising additional funds and overcoming financial difficulties.
She elaborated that, while the government will give funding to public-sector insurance firms, private-sector insurers will have to raise their own capital.
On the solvency-related problems being faced by insurance companies, she said: “If growth capital is hard to come by, there will be a stress situation. In order that the stress situation is not left unattended, we need to raise the FDI limit.”
She asserts that the Covid-19 pandemic has exacerbated the situation and intensified the problems that insurance firms are facing.
As per the finance minister, the initiative to increase the FDI limit is centered on suggestions made by the Insurance Regulatory and Development Authority (IRDAI) after comprehensive consultations with stakeholders.
According to Sitharaman, the amount of FDI flowing into the insurance industry has risen significantly since the government raised the limit from 26 percent to 49 percent in 2015.
She also stated that FDI into the industry has totalled approximately Rs 26,000 crore since 2015. In addition, assets under management in the insurance industry have increased by 76% in the last five years.
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