Insurance Bill retains proposal to raise FDI cap to 49%
This means the government even negated a compromise formula that came up during informal discussions between the government and the Opposition to carve out a 23% window for equity holding by foreign institutional investors or overseas corporate bodies, while retaining the FDI cap at 26%. Of course, it remains to be seen if the government would be able to get the Bill passed, given that the BJP is unconvinced about the need to raise the FDI cap in insurance.
Finance ministry sources told FE that the composite cap of 49% foreign investment (including both FDI and FII components) was retained as the aim now is to get up to 49% FDI in the sector, which needs around $12 billion worth of capital by 2020.
“The sector, which is burdened with losses, urgently needs long-term capital for expansion and increasing penetration,” an official said.
“We cannot afford any provision restricting FDI to less than 49%, especially when the Indian companies are finding it difficult to raise capital,” the official said.
The compromise formula was considered following opposition from members of the parliamentary standing committee on finance, including