Follow us on
Welcome Guest! You are here: Home » National
Insurance bill report tabled in Rajya Sabha, Congress indicates support
Wednesday December 10, 2014 10:07 PM, IANS

The Indian government's move to increase the FDI limits in insurance brighetened with a select committee of the Rajya Sabha headed by BJP's Chandan Mitra Wednesday tabling its report, backing the bill proposing to hike existing 26 percent cap to 49 percent and the Congress saying it supported the provision "in principle".

According to industry experts, a total of around Rs.62,500 crore of fresh foreign funds is expected to come in life and non-life sectors when the foreign holding limits are hiked.

The report recommends a composite cap "of 49 percent should be inclusive of all forms of foreign direct investment and foreign portfolio investments."

At least 11 out of the 15 members, save those of the Trinamool Congress, Samajwadi Party, Communist Party of India-Marxist and Janata Dal-United, agreed to the report.

Congress spokesperson Abhishek Manu Singhvi expressed "in principle" support to the bill.

"Most of our concerns have been met with in the select committee of the parliament. That in itself is a huge victory," he told media persons in New Deli.

Singhvi said that the bill was a Congress idea in principle and the party's support now depended on the exact shape and "nitty-gritty" of the final bill which will be tabled.

One of the Congress' demands was that FDI and FII are kept separate so that the foreign money does not breach the sectoral cap of 49 percent. The party's support is crucial for the passage of the bill in the upper house where the Narendra Modi government doesn't have a majority.

Industry experts told IANS that the bill if passed will pave way for the much-needed funds that would have a cascading effect like increase in household savings, fresh investment, new employment, higher insurance penetration and others. Hike in the FDI limit has been a long pending demand of the private sector players.

Showing intent on speeding up reforms, the Modi government has expressed confidence at getting the insurance bill passed to allow Indian insurance companies easier access to much-needed capital for growth.

India opened up the insurance sector for private players in 2000, setting the cap on FDI at 26 percent with a start up capital of Rs.100 crore for life and non-life insurers.

Life Insurance Council of India secretary general V. Manickam told IANS that the increase in FDI limits would attract more foreign players to India, where the uninsured population is around 30 crore.

According to him, the upward revision is expected to result in additional capital infusion of around Rs.50,000 crore by 2020.

"The total capital of the life insurance industry is now at around Rs.30,000 crore of which 26 percent is the foreign component. On the face value, a minimum of Rs.7,500 crore additional funds is expected to come," Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services told IANS over phone from Mumbai.

However dilution of equity stakes does not happen on the face value, he remarked.

He said there will be some mergers and acquisitions happening at the lower end of the industry.

Parekh does not expect more new players coming in as all the major players have already come in.

Manickam said there will be a fresh employment generation of around 300,000 as the number of branch offices is expected to go up from 10,000 to 30,000, while the number of agents selling life insurance policies will go up to four million from the present levels of around two million.

Along with the growth of the life insurance sector, the household savings would also grow 40 percent from the current 30 percent, he added. According to Manickam, some life insurers may also come out with initial public offering in five/six years time.

While the central government's move will provide the much needed lifeline to the life insurers, the non-life sector is not starved of funds.

"All the non-life players are adequately capitalised and are stable," an industry official told IANS.

According to General Insurance Council, the representative body of non-life insurers, the total capital plus reserves as on March 31, 2014 stood at Rs.42,656 crore. The industry has around 9,855 offices and employs around 105,000.

However whether the increase in FDI limit would result in deeper insurance penetration has to be seen though the benefits of opening up the sector in 2000 has not reached a large section of the populace, as noted by union Finance Minister Arun Jaitley in his budget speech.


Share this page
Note: By posting your comments here you agree to the terms and conditions of
comments powered by Disqus
| Quick links
Contact us
Subscribe to: RSS » Facebook » Twitter » Newsletter Disclaimer | Terms of Use | Advertise with us | Link Exchange is part of the Awaz Multimedia & Publications providing World News, News Analysis and Feature Articles on Education, Health. Politics, Technology, Sports, Entertainment, Industry etc. The articles or the views displayed on this website are for public information and in no way describe the editorial views. The users are entitled to use this site subject to the terms and conditions mentioned.
© 2012 Awaz Multimedia & Publications. All rights reserved.