The Reserve Bank of India by a circular dated 7 April 2015
notified the government's decision to raise the foreign direct
investment limit in the insurance sector from 26 per cent to 49 per
cent of the paid up equity capital.
Foreign direct investment up to 26 per cent will continue to be
under the "Automatic route" (without prior
government approval) while investment above 26 per cent and up to
49 per cent will need to follow the government approval
route.
The Reserve Bank of India has also included a new term
'Other Insurance Intermediaries appointed under the
provisions of Insurance Regulatory and Development Authority Act,
1999' under the definition of 'Insurance'.
Foreign investment in the insurance sector will be subject to
compliance of the Insurance Act, 1938 and the condition
that companies bringing in foreign direct investment shall obtain
the necessary license to undertake insurance activities from the
Insurance Regulatory & Development Authority of India. Foreign
portfolio investment in an Indian insurance company will also
continue to be governed by the provisions of the Foreign
Exchange Management (Transfer or issue of security by a person
resident outside India) Regulations, 2000 and the
Securities Exchange Board of India (Foreign Portfolio
Investors) Regulations and any increase in foreign investment
in an Indian insurance company shall be in accordance with pricing
guidelines specified by Reserve Bank of India under the Foreign
Exchange Management Act, 1999.
An Indian insurance company should ensure that its ownership and
control remains at all times in the hands of resident Indian
entities.
Originally published June 2015
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