FDI status quo for co-op insurers
The proposed increase in foreign direct investment (FDI) cap for insurance companies would not cover all segments of the sector .
By Niranjan Bharati & Subhash Narayan, ET Bureau |
NEW DELHI: The proposed increase in foreign direct investment (FDI) cap for insurance companies would not cover all segments of the sector . The group of ministers (GoM) on insurance has decided to keep the FDI limit in co-operative insurance companies at its existing level of 26%. However, the government would push for increasing overall FDI cap in insurance sector to 49%.
The move is aimed at protecting the basic character of societies by restricting corporate interest in them. The decision would have a key important impact on companies like Iffco-Tokyo which needed funds for expansion. Investment in the sector by co-operative groups would also be subject to this limitation.
���While approving raising FDI cap on insurance sector to 49%, the GoM on Insurance Laws (Amendment) Bill 2006 said in its first meeting that the basic character of societies may be disturbed if corporate interest in such entities is increased beyond a level,��� an official in the finance ministry said. He said the view has been accepted by the finance ministry also and it would not push for increasing FDI cap on co-operative insurance.
The insurance law describes an insurance co-operative society as an entity registered under the Cooperative Societies Act, 1912 having a minimum paid-up capital of Rs 100 crore. The corporate interest in these entities is restricted to 26% of the total capital. They can carry on the business of life and general insurance business.
The finance ministry is preparing the final draft of the Insurance Bill to include the changes suggested by the GoM.
The move is aimed at protecting the basic character of societies by restricting corporate interest in them. The decision would have a key important impact on companies like Iffco-Tokyo which needed funds for expansion. Investment in the sector by co-operative groups would also be subject to this limitation.
���While approving raising FDI cap on insurance sector to 49%, the GoM on Insurance Laws (Amendment) Bill 2006 said in its first meeting that the basic character of societies may be disturbed if corporate interest in such entities is increased beyond a level,��� an official in the finance ministry said. He said the view has been accepted by the finance ministry also and it would not push for increasing FDI cap on co-operative insurance.
The insurance law describes an insurance co-operative society as an entity registered under the Cooperative Societies Act, 1912 having a minimum paid-up capital of Rs 100 crore. The corporate interest in these entities is restricted to 26% of the total capital. They can carry on the business of life and general insurance business.
The finance ministry is preparing the final draft of the Insurance Bill to include the changes suggested by the GoM.
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