Draft bill seeking 100 pc FDI in insurance to be sent for Cabinet nod soon:DFS Secretary

New Delhi, Feb 3 (PTI): The Finance Ministry is set to submit a draft bill to the Union Cabinet seeking to increase the Foreign Direct Investment (FDI) limit in the insurance sector to 100%, Financial Services Secretary M Nagaraju said on Monday.

"Finance Minister has already given her approval and announced in the Budget. Now we will prepare a draft bill with the help of the Law Ministry," Nagaraju said during an interaction with the media.

Once finalized, the bill will be sent to the Cabinet for approval and is expected to be introduced during the ongoing Budget session of Parliament, he added.

Key Budget Proposal & FDI Enhancement​

During the Union Budget presentation, Finance Minister Nirmala Sitharaman proposed raising the foreign investment limit from 74% to 100% as part of a new-generation financial sector reform.

"This enhanced limit will be available for those companies that invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," Sitharaman said.

So far, the insurance sector has attracted ₹82,000 crore in FDI, and the proposed amendment is expected to boost further investments.

Legislative Amendments & Regulatory Changes​

To implement the proposed 100% FDI cap, the government will amend:

• The Insurance Act, 1938 – the primary legislation governing the insurance sector in India.
• The Life Insurance Corporation (LIC) Act, 1956 – regulating LIC operations.
• The Insurance Regulatory and Development Authority (IRDA) Act, 1999 – governing insurance regulation and oversight.

Additionally, the bill aims to simplify certain procedures and rules, ensuring a smoother operational framework for insurers.

Market Impact & Industry Expansion​

The insurance sector currently comprises 25 life insurance companies and 34 general insurance firms, including major entities such as Agriculture Insurance Company of India Ltd and ECGC Ltd.

Increasing the FDI limit is expected to:

• Improve insurance penetration across India.
• Attract new players into the market, intensifying competition.
• Create employment opportunities in the financial services sector.

Past FDI Reforms in Insurance​

The FDI cap in the insurance sector has been gradually liberalized over the years:

• 2015: Raised from 26% to 49%.
• 2021: Increased from 49% to 74%.
• 2024 (Proposed): Full 100% foreign ownership allowed.

If approved, this reform would mark a significant shift in India's insurance landscape, potentially attracting global insurers and enhancing capital inflows.