The Parliament has approved The Insurance (Amendment) Bill, 2021 to raise Foreign Direct Investment (FDI) limit in the insurance sector from 49 per cent to 74 per cent.
Clarifying on the Bill Finance Minister Nirmala Sitharaman clarified that hiking the FDI limit in the insurance sector will help insurers raise additional funds and tide over the financial problems. The government will provide funds to the public sector insurance companies but private players will have to raise capital on their own.
She further stated, after observing that insurance companies are facing solvency related issues, “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 FDI limit was being raised on the recommendations of insurance regulator IRDAI which has done extensive consultations with the stakeholders, she added.