A bill to increase foreign direct investment limit in the insurance sector to 74 per cent from the current 49 per cent was approved by the Rajya Sabha on Thursday.
Replying to the debate on Insurance (Amendment) Bill, 2021, Finance Minister Nirmala Sitharaman said foreign investment will supplement domestic long-term resources with a view to further insurance penetration in the country.
The bill was passed with a voice vote.
Sitharaman said the decision to increase the FDI limit to 74 per cent was taken after sector regulator IRDAI held detailed consultations with stakeholders.
As per the bill, 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 a general reserve.
It was in 2015 when the government had last hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent.
Increase in FDI is aimed at improving life insurance penetration in the country. Life insurance premium as a percentage of GDP is 3.6 per cent in the country, way below the global average of 7.13 per cent, and in case of general insurance, it is even worse at 0.94 per cent of GDP, as against the world average of 2.88 per cent.