Government weighs automatic route for all 49% FDI in insurance sector

Government is considering a proposal to bring the 49 per cent foreign direct investment (FDI) permitted in the insurance sector in the automatic approval route in order to attract more overseas capital.

Currently, FDI up to 26 per cent in insurance business is permitted through automatic approval route, while for FDI up to 49 per cent, the investment needs approval of the Foreign Investment Promotion Board.

An announcement to this effect is expected in the forthcoming budget and form part of the government's efforts to improve the ease of doing business.

Sources said the proposal both the sector regulator IRDAI and the Reserve Bank of India are backing the proposal as the management control will still be is in the hands of Indians.

At present, as many as 10 proposals, including that of ICICI Prudential Life, ICICI Lombard General Insurance and Aviva Life Insurance, are pending at different stages of clearances.

There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in the general insurance, including state-owned General Insurance Corporation (GIC), which is also the sole national reinsurer.

In order to deepen the re-insurance market, IRDAI permitted UK-based Lloyds to set up business in India. Lloyds India will ensure that the market and the constituents are housed in one location for the conduct of reinsurance business.

India received $4.5 billion foreign direct investment (FDI) in December 2015, recording a whopping 114 per cent growth from the same period in 2014.

During the period, sectors which attracted FDI include computer software and hardware, trading, services, automobile and telecommunications. India receives maximum FDI from Singapore, Mauritius, the Netherlands and Japan.