Dear Sir/Madam,
Cabinet may retain FDI cap in insurance sector at 26 pc
The government may retain
Foreign Direct Investment (FDI) in the insurance sector to existing 26 per cent
as recommended by Standing Committee on Finance. The issue of foreign investment in
insurance sector is on the agenda of the Cabinet, which will meet today. As per the current regulation, a foreign player cannot have
more than 26 per cent stake in private insurance companies in the country. The Standing Committee had rejected
the government's proposal to raise foreign direct investment ceiling to 49 per
cent in December last year.
The committee in its report on the Insurance
Laws (Amendment) Bill, 2008, had said the proposal
to increase the FDI cap to 49 per cent in insurance companies seems to have
been decided upon "without any sound and objective analysis of the status
of the insurance sector following liberalisation". It had said that the policy stance of
enabling a greater role for foreign capital in the insurance sector would not
necessarily have the desired impact. "Increased
role of foreign capital may lead to the possibility of exposing the economy to
the vulnerabilities of the global market, flight of capital outside the country
and also endangering the interest of the policy holders," it had said.
However, Foreign insurers and their domestic
partners have been demanding an increase in the FDI cap to 49 per cent to fund
business expansion. The
government had introduced the Insurance Bill in the Rajya Sabha in December
2008 with an aim to bring improvement and revision of laws relating to
insurance business in the changed scenario of private participation.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020