Govt Set To Hike FDI Limit For Insurance Sector To 100 Per Cent.

Finance Minister Nirmala Sitharaman on Saturday proposed to raise the foreign investment limit to 100 per cent in the insurance sector as part of new-generation financial sector reforms. Presenting Budget 2025-26, the Finance Minister said the FDI limit for the insurance sector will be raised from 74 to 100 per cent.

"This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," she said. To enhance the FDI limit, the government will have to bring amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999. The Insurance Act 1938 serves as the principal Act to provide the legislative framework for insurance in India.

It provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, shareholders and the regulator -- Insurance Regulatory and Development Authority of India (Irdai). The entry of more players in the sector would not only push penetration but result in greater job creation across the country.

Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India. These include companies like Agriculture Insurance Company of India Ltd and ECGC Ltd. The FDI limit in the insurance sector was last raised -- from 49 per cent to 74 per cent -- in 2021. It was in 2015 when the government hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent. The government earlier allowed 100 per cent foreign direct investment in insurance intermediaries.

(PTI)