Government notifies amendment in FEMA to enable increase in FDI limit in insurance sector to 74% - (21 Aug 2021)

Insurance

The government has notified Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021 (Rules, 2021) amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 to hike Foreign Direct Investment (FDI) limit in the insurance sector to 74 per cent.

The “Sectoral Cap” as provided in Rules, 2019 for Insurance Company, Insurance Brokers, Third Party Administrators, Surveyors and Loss Assessors and Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 has been increased from existing 49% to & 74%.

The notification said that “Applications for foreign direct investment in private banks having joint venture or subsidiary in insurance sector may be addressed to the Reserve Bank for consideration in consultation with the Insurance Regulatory and Development Authority of India (IRDAI), in order to ensure that the limit of foreign investment applicable for the insurance sector as specified in serial number F. 8.1 and F. 8.2 is not breached.”

The Rules, 2021 also requires that the insurance companies must have 50% of their directors as independent directors unless the chairperson of its board is herself or himself. In that case, at least one-third of its board should have independent directors. Foreign-owned insurance companies are also mandated to have the majority of their directors and key management persons as resident Indians.

Tags : FDI INSURANCE SECTOR