New Delhi: The limit for Foreign Direct Investment (FDI) in insurance sector was notched up to 74 per cent after the Insurance (Amendment) Bill, 2021 gets on Monday a green signal in Lok Sabha to help insurers deal with issues concerning financial stress.
Finance Minister Nirmala Sitharaman said on Monday that raising the FDI limit in the insurance sector to 74 per cent was necessary as insurance companies are facing solvency related issues, she said while moving the Insurance (Amendment) Bill, 2021 for consideration and passage in the Lok Sabha.
She had further added, “if growth capital is hard to come by, there will be a stress situation. In order that the stress situation is not left unattended, we need to raise the FDI limit.”
The amendment bill, that seeks to increase the FDI limit in insurance from 49 per cent to 74 per cent, was passed by the Rajya Sabha last week.
The COVID-19 pandemic, Sitharaman said, has further added to the woes of the insurance companies.
The minister observed that the FDI limit was being raised on the recommendations of the regulator IRDAI which had held extensive consultations with the stakeholders.
She also noted that the FDI inflow in the insurance sector had increased significantly after the government decided to raise the cap from 26 per cent to 49 per cent in 2015. As much as ₹26,000 crore has come as FDI in the insurance sector since 2015, she said, adding the asset under management (AUM) in this sector too have grown by 76 per cent during the last five years.
Later, initiating the debate on the bill, opposition leader from Congress, Manish Tewari said when the BJP was in the opposition, it opposed an increase in FDI. He said the then UPA government could not breach the wall put by late Sushma Swaraj and Arun Jaitely in both Houses of Parliament.
He further alleged that the BJP has now took a complete U-turn regarding the hike in FDI limit in insurance sector. Referred to certain parliamentary committees where senior BJP leaders, including Yashwant Sinha had opposed hike in FDI, Tewari said though the bill is small it has large implications.
Meanwhile, defending the bill, BJP minister Jagdambika Pal said the measure is in favour of India’s growth graph as the government has made sufficient safeguards while keeping in mind the interests of people.