During the discussion on the Bill in the Lok Sabha, Finance Minister Nirmala Sitharaman said that raising the FDI limit in the insurance sector was necessary to help insurers deal with issues concerning financial stress.
The Bill was passed in the Rajya Sabha last week on March 18.
Sitharaman on Monday said that the insurance companies are facing solvency related issues, adding, “if growth capital is hard to come by, there will be a stress situation. In order that the stress situation is not left unattended, we need to raise the FDI limit.”
The COVID-19 pandemic, Sitharaman said, has further added to the woes of the insurance companies.
The minister further said that the FDI limit was being raised on the recommendations of the regulator IRDAI which had held extensive consultations with the stakeholders.
Sitharaman said that since the FDI cap was increased from 26 26 per cent to 49 per cent in 2015, it has resulted in significant inflow helping the sector immensely.
As much as Rs 26,000 crore has come as FDI in the insurance sector since 2015, she said, adding the asset under management (AUM) in this sector too have grown by 76 per cent during the last five years.
Last week in the upper house, Sitharaman said that while control will go to foreign companies, the majority of directors and key management persons will be resident Indians.
“Majority of directors in the board and key management persons to be resident Indians which means every law of the land will be applicable to them. And a specific percentage of the profits is to be retained as general reserves. It cannot be (taken away),” she had said.
The opposition members of the UPA opposed the government’s move. Congress leader Manish Tewari said the Bill will have large implications.