Insurance FDI cap to be hiked to 49%
11 July 2014 6:35 AM IST
In a big relief to the capital-starved private insurance sector, Finance Minister Arun Jaitley on Thursday proposed raising the foreign direct investment (FDI) cap from 26 per cent to 49 per cent.
‘The insurance sector is investment starved. Several segments of insurance sector need expansion. The composite cap of the insurance sector is proposed to be increased to 49 per cent from the current level of 26 per cent with full management and control through the FIPB route,’ he said while presenting the Budget for 2014-15. The move would help insurance firms to get much needed capital from overseas partners.
The proposal to raise FDI cap has been pending since 2008 when the previous UPA government came up with Insurance Laws (Amendment) Bill to hike foreign holding in insurance joint ventures to 49 per cent from the existing 26 per cent. He said the government will take up the bill soon.
Industry experts welcomed the government’s move and said it will increase the capital inflow. ‘Its a very positive announcement and we have been expecting it for a long time. This will boost the industry in terms of capital infusion and employment generation.
‘The insurance companies were waiting for this relaxation and now this will encourage companies to enter the capital markets,’ HDFC Life CFO Vibha Padalkar said. The decision will help the new entrants who are cash-starved and struggling for growth.
‘The insurance sector is a very cash intensive sector that needs a lot of capital infusion. This decision will help all those new and mid to small companies who are struggling for growth. The industry is likely to see a fund inflow of $10-15 billion conservatively, it might be double of this,’ she added.
Echoing similar views, Bharti AXA General Insurance Managing Director and CEO Amarnath Ananthanarayanan said the overall direction of increasing FDI is good as it will increase capital investment in the insurance sector.
Raising the exemption limit for investment in financial instruments under Section 80C to Rs 1.5 lakh from Rs 1 lakh is also likely to increase investment by the policyholders, he said. Financial consultants EY India Partner, Tax and Regulatory Services, Anish Thacker said FDI in the insurance sector has been proposed to be increased to 49 per cent with full Indian management and control under the FIPB route.
‘The insurance sector is investment starved. Several segments of insurance sector need expansion. The composite cap of the insurance sector is proposed to be increased to 49 per cent from the current level of 26 per cent with full management and control through the FIPB route,’ he said while presenting the Budget for 2014-15. The move would help insurance firms to get much needed capital from overseas partners.
The proposal to raise FDI cap has been pending since 2008 when the previous UPA government came up with Insurance Laws (Amendment) Bill to hike foreign holding in insurance joint ventures to 49 per cent from the existing 26 per cent. He said the government will take up the bill soon.
Industry experts welcomed the government’s move and said it will increase the capital inflow. ‘Its a very positive announcement and we have been expecting it for a long time. This will boost the industry in terms of capital infusion and employment generation.
‘The insurance companies were waiting for this relaxation and now this will encourage companies to enter the capital markets,’ HDFC Life CFO Vibha Padalkar said. The decision will help the new entrants who are cash-starved and struggling for growth.
‘The insurance sector is a very cash intensive sector that needs a lot of capital infusion. This decision will help all those new and mid to small companies who are struggling for growth. The industry is likely to see a fund inflow of $10-15 billion conservatively, it might be double of this,’ she added.
Echoing similar views, Bharti AXA General Insurance Managing Director and CEO Amarnath Ananthanarayanan said the overall direction of increasing FDI is good as it will increase capital investment in the insurance sector.
Raising the exemption limit for investment in financial instruments under Section 80C to Rs 1.5 lakh from Rs 1 lakh is also likely to increase investment by the policyholders, he said. Financial consultants EY India Partner, Tax and Regulatory Services, Anish Thacker said FDI in the insurance sector has been proposed to be increased to 49 per cent with full Indian management and control under the FIPB route.
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