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Cabinet approves increase in FDI limit in insurance

March 12, 2021

According to a report by Press Trust of India, the Indian Cabinet has approved the increase in the foreign direct investment (FDI) limit in insurance companies from 49% to 74%.

The decision to increase the FDI was taken during Budget 2021 on February 1. Finance Ministe,r Nirmala Sitharaman in her speech had said “I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards,”.
The new FDI rules requires the majority of directors on the board and management to be resident Indians and at least 50% of directors should be independent.

The companies must also retain a specified percentage of profit as a general reserve.

With the Cabinet’s nod to amending the insurance law, the FDI changes will be introduced in Parliament for approval. Once the Parliament approves the changes, the process to introduce an applicable framework would start, an official said.

The increase in the FDI limit will provide insurance companies with additional funds to expand their business. This will also provide access to better technical know-how, innovation, and new products.

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