Introduction
For several years, stakeholders in the Indian insurance sector have wanted the foreign direct investment (FDI) limit for Indian insurers to be increased to 74% in parity with the FDI limit applicable to the private banking sector. On 1 February 2021, pursuant to the central budget speech for the financial year 2021-2022, the finance minister announced that the FDI cap for Indian insurers will be increased from 49% to 74%. In addition, it was announced that under the new framework:
foreign ownership and control would be allowed with safeguards;
the majority of directors on an insurer s board of directors and key management persons would be required to be resident Indians;
Introduction
The control and acquisition of entities in India by foreign investors and private equity (PE) funds is regulated by:
the foreign investment norms specified by the Reserve Bank of India;
the norms specified by the Securities Exchange Board of India (where the entity is a listed entity); and
any other laws or regulations governing the business of the target entity.
Entities engaged in insurance business must follow additional norms regarding foreign investment as specified by the Insurance Regulatory and Development Authority of India (IRDAI). This article answers commonly asked questions in relation to foreign investment in insurers in light of the extant insurance statutory and regulatory framework.
Budget 2021 | Amendments required for liberalisation of insurance sector
Since the objective of the government is to bring an impetus to FDI inflow in insurance companies, stakeholders will now be very keen to learn the fresh terms and conditions that will act as riders to their ability to own and control insurance companies Indranath Bishnu February 04, 2021 / 09:00 AM IST
As part of the Budget presented by Finance Minister Nirmala Sitharaman on February 1, the government’s proposal to further liberalise foreign direct investment (FDI) in Indian insurance companies to up to 74 percent from the existing 49 percent cap was announced. This proposal is followed by the raise in FDI limits for investment in insurance intermediaries to up to 100 percent, which was announced by Sitharaman in her maiden Budget speech in July 2019, and effected subsequently in September 2019.