In his eighth budget speech on Saturday, nearly two and a half decades after the liberalization of the Indian insurance sector, Finance Minister Nirmala Sitharaman announced the opening of the country’s insurance sector for 100 percent foreign direct investment (FDI). At present, the limit of foreign investment in India’s insurance sector is 74 percent. Industries sources believe that this move will now give foreign insurance companies easy for their presence in the country. He had to first partnered with an Indian unit for business in India.
In his speech, Sitharaman said, ‘This increased limit will be applicable to companies who will invest their entire premium in India. The current security and conditions related to foreign investment will be reviewed and they will be simplified. According to investment norms, India’s insurance companies usually invest their money in India. However, they also have an option to invest abroad.
Industry experts say that because of this, a comprehensive review of fine prints (especially in connection with that the entire premium will have to invest in India) is necessary.
The decision to open the insurance industry for 100 percent FDI has been taken at a time when the insurance regulator is emphasizing the need for ‘insurance for all by the year 2047’. This requires important capital flow in this region through entry of new companies or capital expansion in existing companies.
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Roy of Financial Services Advisory Partner and Leader Jaideep K Roy said, ‘Foreign insurance companies, who are looking for the Indian market, will no longer have to look for an Indian partner and they will be able to set up their business directly. This will reduce the time taken to enter their entry into the Indian insurance market at least two years. At the same time, the time taken in the interaction and signature for the joint venture will also be saved.
In December 2014, the government increased the FDI limit from 26 per cent to 49 per cent in the region. After nearly seven years, the government again increased this limit and allowed it to increase to 74 percent. There are differences on whether the expected investment has come from this step. According to industry experts, it has become difficult to attract investment in the region in view of the challenges of finding an Indian partner of the company’s culture and ethos without full autonomy on business operations.
According to government data, from the year 2015, the insurance sector received an amount of Rs 54,000 crore as FDI. In the year 2015, the government changed the FDI rules in the region.