Govt may raise FDI cap in insurance to 100%, aims to unlock sector’s full growth potential: Sitharaman

In a written response, she noted that India’s insurance sector is expected to expand faster than both the global and emerging market average growth rates.

The Insurance Bill to raise the FDI cap to 100% is not part of the agenda for the ongoing Parliament session and may be tabled during the winter session, Sitharaman said.

She clarified that the proposed FDI increase is an enabling provision, allowing interested companies to explore a higher foreign investment threshold.

“Further, this will eliminate the need for foreign investors to find Indian partners for the remaining 26%, easing the process of setting up their operations in India, effectively increasing the number of insurers in the country,” she stated.

Along with raising the FDI ceiling, the Bill also seeks to allow composite licensing so that a single entity can undertake life, general, or health insurance businesses.

It also proposes to ease current restrictions on dividend repatriation and on appointment of key management personnel for foreign-owned insurers—moves aimed at improving the overall ease of doing business.

The government believes that capital infusion is essential to support the sector’s growth and increase insurance penetration in India.

Although FDI of up to 74% is already permitted, most private insurers have not utilised this fully. Only 4 out of 19 life insurance firms have reached the 74% limit, and none among the 20 general insurers have done so.

“The decision to increase FDI component in a particular insurance company is made by its promoters, depending upon various factors such as capital requirement of the company, solvency requirement, future business plans, etc,” Sitharaman added.

As of December 31, 2024, foreign investors held 47.82% of equity share capital in life insurers and 29.46% in non-life insurance companies.