24/12/2014 4:15 PM IST | Updated 15/07/2016 8:24 AM IST

Modi Govt Considers Raising Foreign Cap In Insurance Via Ordinance

Hindustan Times via Getty Images
NEW DELHI, INDIA- NOVEMBER 24: Prime Minister Narendra Modi walks with Minister of Urban Development and Parliamentary Affairs Venkaiah Naidu, Minister of State Skill Development & Entrepreneurship (Independent Charge) Rajiv Pratap Rudy, Dr. Jitendra Singh, Minister of Science and Technology during the opening day of the winter session of Parliament on November 24, 2014 in New Delhi, India. The Narendra Modi government, which has promised big reforms in its first budget, is looking to push the Insurance Bill as well as the Goods and Service Tax Bill in the month-long winter session that begins today. (Photo by Vipin Kumar/ Hindustan Times via Getty Images)

The government today approved promulgation of an Ordinance to hike Foreign Direct Investment (FDI) cap in the insurance sector to 49 per cent from 26 per cent, as the legislation could not be passed in the Parliament session that ended on Tuesday.

“The Cabinet has cleared the Ordinance on insurance sector,” sources said after the meeting of the Union Cabinet headed by Prime Minister Narendra Modi here.

The Insurance Bill, which has been pending since 2008 in the Rajya Sabha, seeks to increase the composite foreign investment limit in insurance companies to 49 per cent from current level of 26 per cent.

The 49 per cent cap would include both FDI and foreign portfolio investments. The proposed hike in foreign investment limit to 49 per cent in the insurance sector has potential to attract up to USD 7-8 billion (about Rs 50,000 crore) from overseas investors, giving a major boost to the segment.

The total capital deployed in the private life insurance sector is close to Rs 35,000 crore. At FDI at 26 per cent, foreign equity is close to Rs 8,700 crore.

The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion despite being approved by the Select Committee of the Upper House because of the uproar by opposition parties over the conversion and other issues.

There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in general insurance business. In addition, GIC is the sole national reinsurer.