Govt defers restrictions on common directorships across insurers, banks

Mumbai: In a relief to insurance companies, the government has kept in abeyance the controversial clause that sought to restrict common directorships across banks, insurers and investment companies. The move eases immediate concerns around board level disruptions and offers the industry more time as broader insurance reforms come into force.

The Insurance Laws (Amendment) Act, 2025, also referred to as Sabka Bima Sabki Raksha, was notified in the official gazette on December 20, 2025. However, a notification has now been issued, bringing most sections of the amendment into effect from February 5, 2026 barring this one.

The government has excluded the amendment to the section which deals with restrictions on common directorships and bars a director or officer of an insurer from simultaneously serving as a director or officer of another insurer operating in the same line of business, or of a banking company or an investment company. With this section kept in abeyance, the proposed prohibition will not take effect for now, while all other amendments under the Act will be implemented as scheduled.

The decision follows strong representations from the insurance industry, which had flagged serious concerns over the practical impact of the amended provision. Insurers argued that the clause, though was looking at strengthening governance and reducing conflicts of interest, could have had far reaching impact on the existing board structures.


Most large life and general insurers in India are promoted by banks and have nominee directors drawn from their promoter banks' boards or senior management. Companies such as SBI Life, SBI General Insurance, HDFC Life and IndiaFirst Life typically have common directors to represent promoter interests.

A strict enforcement of the amended Section 32A could have forced such directors to vacate board positions, particularly in bank led joint ventures.

There were concerns on independent directors too. Many independent board members serve across multiple financial institutions, including banks, insurers and investment firms. Industry executives warned that an immediate implementation could have rendered several such directors ineligible, leading to sudden vacancies and potential governance gaps across life, general and health insurance companies.