Union Cabinet on 23 December 2014 approved promulgation of an Ordinance to hike Foreign Direct Investment (FDI) cap in the insurance sector to 49 percent from 26 percent. Now President will sign the ordinance as per Article 123 of the Constitution.
The ordinance route was taken after Insurance Laws Amendment Bill, 2008 could not be passed in the winter session of Parliament in December 2014.
The 49 percent of cap in insurance sector will include both FDI and foreign portfolio investments.
The hike in FDI of insurance sector has potential to attract up to 7-8 billion US dollars (about 50000 crore rupees) from overseas foreign investors.
At present, total capital deployed in the private life insurance sector is close to 35000 crore rupees and the foreign equity is close to 8700 crore rupees when FDI cap is at 26 percent.
There are 52 insurance companies operating in India, among them 24 are in the life insurance business and 28 in general insurance business.
The Insurance Laws Amendment Bill, 2008 has been pending in the Rajya Sabha since 2008. The bill seeks to increase the composite foreign investment limit in insurance companies to 49 percent from 26 percent.
Besides, Union cabinet also apporved the re-promulgation of Ordinance on coal blocks auction titled Coal Mines (Special Provisions) Bill, 2014 after it also could not be passed in the winter session of the Parliament in December 2014 due to impasse in Rajya Sabha.
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