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Budget 2021 increases FDI limit in insurance from 49% to 74%

Foreign companies will be allowed to own insurance companies subject to conditions

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Finance Minister Nirmala Sitharaman on Monday proposed increasing the foreign direct investment limit in insurance from 49 per cent to 74 per cent in the budget 2021-22. Currently, the FDI limit is capped at 49 per cent.  

She added that foreign companies will be allowed to own insurance companies subject to conditions. 

In the first paperless Union Budget, Finance Minister Nirmala Sitharaman also said investor charter would be introduced as a right of all financial investors across all financial products.

She proposed to amend the Insurance Act 1938 to "increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards". "Under the new structure, the majority of directors on the board and key management persons would be resident Indians with at least 50 per cent of directors being independent directors and specified percentage of profits being retained as general reserve," she said while presenting the Budget 2021-22. 

Raising the investment cap in insurance companies was 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. 

While such a move would help insurers attract more capital to expand business, it would also potentially boost the government’s divestment programme.



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