The Lok Sabha on March 22 passed The Insurance (Amendment) Bill, 2021 which seeks to raise the limit for Foreign Direct Investment (FDI) in insurance companies from 49% to 74%. The Bill had earlier been cleared by the Rajya Sabha and now requires Presidential assent to become law.
Finance minister Nirmala Sitharaman, who piloted the Bill in both Houses, said the move was aimed at solving some of the long term capital availability issues in the insurance sector which was a capital intensive industry. She added that stakeholders had been consulted by the insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI) before going ahead with the move.
In her response to the debate on the Bill in the House, Ms. Sitharaman said that apprehensions over the gradual taking over of public sector insurance companies was ill-founded, as the banking and insurance industry has been designated as strategic sectors and that the 74% cap is just a limit posed on the FDI.
She pointed out that the high solvency fund ratio in the sector has led to liquidity stress in the sector and that the Bill will address that stress. “Government can help public sector firms but private companies will have to find ways of raising money,” she said.
Responding to Congress MP Manish Tewari’s apprehensions that the public sector undertakings were going to be disinvested and that it was “akin to selling the family silver”, the Minister said it was not, and the previous UPA government had also pushed for raising the FDI limit.
“Nobody is taking the money outside India. The Bill has safeguards that some of the profit has to be invested within the country,” she said responding to the debate. She said the Bill was about right sizing the public sector and unlocking assets.
Ms Sitharaman asserted that public sector employees will be protected and the measure will also give a fillip to private employees.
“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 said.
Congress MP Jasbir Singh Gill said raising the limit for FDI in insurance not advisable and that the safeguards in the Bill would be as useful as the ones that kept out the East India Company. “Owners are owners and employees are employees, even if they are Indian employees,” he said.
