Govt notifies FDI limit in Indian insurance companies
21 February 2015
Foreign direct investment (FDI) of up to 26 per cent of the total paid-up equity of an Indian insurance company will be allowed through the automatic route, and foreign equity participation above 26 per cent up to the ceiling of 49 per cent will require approval of the Foreign Investment Promotion Board (FIPB).
The Indian Insurance Companies (Foreign Investment) Rules, 2015 notified by the government on Friday, have been prepared on the basis of extensive consultations with all the relevant departments / organisations and incorporate the recent amendments in the law with respect to the treatment of foreign investment in Indian insurance companies.
Foreign equity investment cap of 49 per cent is applicable to all Indian insurance companies and the aggregate holdings of 49 per cent foreign investment in the equity shares by foreign Investors, including portfolio investors, will not be allowed to exceed 49 cent of their paid-up equity capital.
This has been done to ensure that ownership and control of the insurance business remains at all times in the hands of resident Indian entities as referred to in the rules, an official statement said.
The foreign equity investment cap of 49 per cent shall also apply to insurance brokers, third-party administrators, surveyors and loss assessors and other insurance intermediaries appointed under the provisions of the IRDA Act, 1999.
Further, foreign portfolio investment in an Indian insurance company will be governed by the provisions contained in the relevant sub-regulations / regulations under FEMA Regulations, 2000, and provisions of the Securities Exchange Board of India (Foreign Portfolio Investors) Regulations.
Any increase of foreign investment of an Indian insurance company should be in accordance with the pricing guidelines specified by the Reserve Bank of India under the FEMA.
"These rules shall come into force from the date of their publication in the Official Gazette," the statement added.