Ministries to reconsider hike in FDI limits

NEW DELHI: The proposal to hike foreign direct investment (FDI) limits in sectors like insurance, telecom and aviation has been sent to respective ministries for "reconsideration" after the Cabinet failed to take a decision in its last meeting on September 18.
"The proposal to hike FDI has gone to respective ministries for reconsideration," Finance Secretary S Narayan told PTI on the sidelines of an insurance seminar at Delhi University.
Speaking about Finance Ministry''s stance, Narayan said hike in FDI limit in insurance sector was necessary to ensure greater flow in investments to meet capital adequacy norms.
Insurance companies are required to maintain a Asset-liability ratio or solvency ratio of 150 per cent as stipulated by Insurance Regulatory and Development Authority.
This means that as business grows, promoters have to infuse greater amount of capital to comply with IRDA norms.
Prior to the passage of IRDA Act in 1999, Narayan said, a group of ministers had earlier decided to peg foreign investment limit in insurance sector at 40 per cent, of which 26 per cent would be in the form of FDI while the remaining 14 per cent could come from FIIs, OCBs and NRIs.