The government has raised the FDI cap in insurance from 26 to 49% through a notification issued by the DIPP. The limit is composite in nature as it includes foreign investment in forms of foreign portfolio investment, foreign institutional investment, qualified foreign investment, foreign venture capital investment and non-resident investment.
The Insurance Bill, which has been pending since 2008 in the Rajya Sabha, seeks to increase the composite foreign investment limit in insurance companies to 49 per cent from current level of 26 per cent.
The 49 per cent cap would include both FDI and foreign portfolio investments.
The proposed hike in foreign investment limit to 49 per cent in the insurance sector has potential to attract up to USD 7-8 billion (about Rs 50,000 crore) from overseas investors, giving a major boost to the insurance segment.
The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion despite being approved by the Select Committee of the Upper House because of the uproar by opposition parties over the conversion and other issues.
There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in general insurance business.