Cabinet Approves Bill to Raise Insurance FDI to 100%
The Union Cabinet has approved a bill to raise the foreign direct investment limit in the insurance sector to 100 percent, marking a significant shift in India’s policy framework for the industry. The proposal seeks to amend existing insurance laws to allow complete foreign ownership of insurance companies operating in India, subject to regulatory safeguards.
Key Provisions of the Proposed Law
Under the current rules, foreign investors are permitted to hold up to 74 percent stake in insurance companies. The proposed legislation aims to remove this cap entirely, enabling 100 percent foreign ownership. The changes will require amendments to the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. The bill is expected to be introduced in Parliament during the ongoing session.
Rationale Behind the Move
The government has indicated that higher foreign investment is needed to strengthen the insurance sector, improve capital availability, and expand insurance penetration across the country. India continues to have relatively low insurance coverage compared to global benchmarks, and policymakers believe increased foreign participation can bring in capital, advanced risk management practices, and a wider range of products.
Impact on the Insurance Sector
The move is expected to benefit both life and general insurance segments by improving competition and operational efficiency. It may also make India a more attractive destination for global insurance players who were previously constrained by ownership limits. Existing insurers may gain easier access to capital for expansion and innovation.
