Parliament proceedings | Lok Sabha clears Bill to allow upto 74% FDI in insurance sector

The Lok Sabha on March 22 handed The Insurance (Amendment) Bill, 2021 which seeks to increase the restrict for Foreign Direct Investment (FDI) in insurance firms from 49% to 74%. The Bill had earlier been cleared by the Rajya Sabha and now requires Presidential assent to develop into legislation.

Finance minister Nirmala Sitharaman, who piloted the Bill in each Houses, mentioned the transfer was geared toward fixing a number of the long run capital availability points in the insurance sector which was a capital intensive business. She added that stakeholders had been consulted by the insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI) earlier than going forward with the transfer.

In her response to the controversy on the Bill in the House, Ms. Sitharaman mentioned that apprehensions over the gradual taking up of public sector insurance firms was ill-founded, because the banking and insurance business has been designated as strategic sectors and that the 74% cap is only a restrict posed on the FDI.

She identified that the excessive solvency fund ratio in the sector has led to liquidity stress in the sector and that the Bill will tackle that stress. “Government can help public sector firms but private companies will have to find ways of raising money,” she mentioned.

Responding to Congress MP Manish Tewari’s apprehensions that the general public sector undertakings have been going to be disinvested and that it was “akin to selling the family silver”, the Minister mentioned it was not, and the earlier UPA authorities had additionally pushed for elevating the FDI restrict.

“Nobody is taking the money outside India. The Bill has safeguards that some of the profit has to be invested within the country,” she mentioned responding to the controversy. She mentioned the Bill was about proper sizing the general public sector and unlocking property.

Ms Sitharaman asserted that public sector workers will likely be protected and the measure may also give a fillip to non-public workers.

“There are 2.67 lakh employees in the private sector in insurance as against 1.54 lakhs in the public sector. Around 15 lakh insurance agents in the public sector as against 21 lakh in the private sector, there are seven public sector companies, while 61 exist in the private sector and money should be available to them to do business,” she mentioned.

Congress MP Jasbir Singh Gill mentioned elevating the restrict for FDI in insurance not advisable and that the safeguards in the Bill can be as helpful as those that stored out the East India Company. “Owners are owners and employees are employees, even if they are Indian employees,” he mentioned.