Insurance Sector Might Get FDI Relaxations in the Upcoming Budget 2021

While we are getting closer to the Union Budget 2021, it is expected that a major announcement is likely for the insurance sector. In a move to attract foreign direct investment (FDI), the country’s finance minister, Nirmala Sitaraman may increase the FDI limit from the existing 49 per cent to 74 per cent.

FDI cap on insurance company was first raised from 26% to 49% in March 2016. However, it failed to cheer the foreign investors who were looking at management control with at least a 51% stake.

The government which is counting on FDI as a major source of non-debt finance is expected to remove several procedural impediments in attracting the FDI.

According to the reports, the FDI policy is under review to increase inflows of foreign investment. Sectors that have huge potential to attract overseas investments could contain policy directives facilitating FDI, the report adds.

In February last year, the government had amended the FDI policy to allow 100 per cent foreign investment in insurance intermediaries such as insurance agents, web aggregators of insurance policies and brokers. The FDI cap on insurance companies remained at 49 per cent.

It is learnt that the domestic promoters want to unlock the value of their investments and many want to make an exit. Reports reveal that there are investors who want to invest in those companies that are stuck at the upper limit of 49 per cent currently.