Cabinet to soon take up proposal to hike insurance FDI to 49%

NEW DELHI: The Cabinet is likely to soon take up the proposal of hiking foreign investment limit in the insurance sector to 49 per cent, from 26 per cent at present.

"The Finance Minister is keen on getting Cabinet approval on raising FDI cap in insurance sector. It should go to the Cabinet soon," a source said.

Foreign Direct Investment (FDI) in the insurance sector is capped at 26 per cent. With the government taking policy reform initiatives earlier this month, especially allowing FDI in multi-brand retail and aviation sectors, there are expectation that the limit in the insurance sector may also be raised.

The government, sources said, is assessing political implications of the move.

Earlier this week, Insurance Regulatory and Development Authority (Irda) Chairman J Hari Narayan had said that the industry needs big investments for growth in the coming years and will welcome hike in FDI cap.

The government had taken a couple of reform decisions in the past couple of weeks to pep up investment climate. But the decision led to political uncertainty with Trinamool Congress, a key ally of the UPA, quitting the government.

Following pressure from key allies, the government in May this year had postponed a decision on raising the FDI limit in the insurance sector to 49 per cent.

The Insurance Bill, which was tabled in Rajya Sabha in 2008, proposed to increase the FDI limit in the insurance sector to 49 per cent, but Parliamentary Standing Committee on Finance wanted it to be retained at the current level of 26 per cent.