Notification on increasing the cap on FDI in insurance sector to 49%

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The Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce & Industry commenced a press note on implementing the increased FDI limit of 49% in the insurance sector in March 2015.Press notes are official documents issued by DIPP through which new FDI policies or changes in existing ones come into effect. Following the government’s declaration on its hike in FDI in insurance sector to 49%, the Reserve Bank of India (RBI) published a notification.

The main contents of the notification included the liberalization of the current FDI policy in the insurance sector and increasing it to 49% and inclusion of a new term under the definition of ‘Insurance’. As per the notification the new definition of ‘Insurance’ includes Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999′.It  proposed that while increasing the foreign investment ,an Indian insurance company should ensure to maintain its control and ownership within the hands of Indian residents. The foreign investments up to 26 percent come under done through automatic route but any investment beyond 26 percent and up to 49 percent needs the approval of government.

RBI also announced that the new pricing strategies of an Indian insurance company due to its increased foreign investment shall be strictly in accordance with the guidelines specified by Reserve Bank under the Foreign Exchange Management Act, 1999.The increase in FDI cap to 49% in the insurance sector enables a foreign player or a company to make investments in the any of the domestic insurance company, insurance brokers, third party administrators, surveyors and loss assessors and other insurance intermediaries appointed under the provisions of IRDA Act 1999. The different forms in which  foreign investments can be made  includes Foreign Portfolio Investments(FPI), Foreign Institutional Investments (FII), Qualified  Financial Investors (QFI), Foreign Venture Capital Investors (FVCI) and even investments made by  Non Resident Indians.

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