The Central government is likely to increase foreign investment limit in insurance and pension sectors to up to 74 per cent in the upcoming budget. Currently, the FDI limit is capped at 49 per cent.
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Reportedly, the finance ministry is bringing in reforms to remove several procedural impediments in attracting foreign direct investment (FDI), which it is banking upon as a major source of non-debt finance. The plan is to facilitate FDI in key sectors such as financial technology, financial services and insurance.
Raising the investment cap in insurance companies is one of the key demands of various global investors after the government had amended the FDI policy to allow 100 per cent foreign investment in insurance intermediaries such as insurance agents, web aggregators of insurance policies and brokers in last year's budget.
A decision is expected at the highest political level ahead of the budget, as raising the limit will require an amendment to the Insurance Act, Economic Times reported. While such a move would help insurers attract more capital to expand business, it would also potentially boost the government’s divestment programme.
Industry lobby groups have also sought a more liberal FDI policy, citing the high amounts of capital companies will need to expand if India is to increase penetration. Overall insurance penetration was 3.7 per cent (premium as percentage of GDP), according to the latest IRDAI data, which is for FY18. Life insurance penetration stood at 2.74 per cent, while non-life was 0.97 per cent.