The Lok Sabha on Monday gave a green signal to a bill that seeks to increase foreign direct investment (FDI) in the insurance sector from 49 percent to 74 percent. The Insurance (Amendment) Bill, 2021 was passed by Rajya Sabha last week.
What does the bill say
- Elaborating on the bill, Finance Minister Nirmala Sitharaman said that hiking the FDI limit in the insurance sector will help insurers to raise additional funds and tide over financial problems. She said that the government will provide funds to the public sector insurance companies but the private players will have to raise capital on their own.
- Sitharaman said the FDI limit was being raised on the recommendations of the regulator IRDAI which had extensive consultations with stakeholders.
- She said the FDI inflow in the insurance sector had increased significantly after the government decided to raise the cap from 26 percent to 49 percent in 2015.
- As much as Rs 26,000 crore has come as FDI in the insurance sector since 2015, she said, adding the asset under management (AUM) in this sector has grown by 76 percent during the last five years.
- On insurance companies facing solvency-related issues, Sitharaman said "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 COVID-19 pandemic has further added to the woes of the insurance companies."
READ MORE: Budget 2021: What Sitharaman announced on FDI cap in insurance sector
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