NEW DELHI: A controversial bill providing for raising the FDI cap in insurance sector to 49 per cent was introduced in Rajya Sabha today but not before a heated debate and adjournments over technicalities as a similar legislation was pending in the House.
The Insurance Laws (Amendment) Bill, 2015 was introduced after Deputy Chairman P J Kurien ruled that the new bill, as passed by the Lok Sabha, could be taken up as it was a “unique and unprecedented” situation.
Members from Left parties, TMC and SP were questioning how a new bill could be introduced when a similar legislation of 2008, which was scrutinised by a Select Committee of Parliament, was pending.
They contended that the House is setting a “wrong precedent” by not appoving its listing by the Business Advisory Committee.
Kurien acknowledged that the situation was “unique and unprecedented” but it is up to the House to either allow, withdraw or reject the Bill.
The bill seeks to replace an ordinance issued by the government earlier, which had come under sharp attack from various quarters.
With the House witnessing heated discussions, it was adjourned twice, once for 10 minutes and then again for 30 minutes.
The bill was then taken up for consideration and the previous Bill was withdrawan by Minister of State for Finance Jayant Sinha.
It seeks to amend the Insurance Act, 1938 and the General Insurance Business (Nationalisation) Act 1972 and the Insurance Regulatory and Development Authority Act, 1999.
It provides for raising FDI cap in insurance sector from 26 per cent to 49 per cent.
The Lower House had passed the Bill on March 4.
Quote from Smt. Arundhati Bhattacharya, Chairman, SBI on recent decision to increase FDI limit in Insurance Sector.
“With financial inclusion proceedings in full force, the timing of increase in limit for FDI in insurance sector could be a game changer. In our estimate, the FDI limit hike in insurance could result in immediate inflow of around Rs. 20,000 crore. Furthermore, FDI hike in insurance is dejure increase in FDI limits for pension sector also as so much of retirement products come from this sector ”
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Statement from Shashwat Sharma, Partner – Management Consulting, KPMG in India
“With the Insurance Laws (Amendment) Bill, 2015 being cleared by Parliament investment of around 200 bln rupees is likely to come into the Indian insurance sector over next few years. There is a lot of interest among foreign insurance companies to enter the market here as it has a lot of potential of growth. With more foreign investment and expertise, new products are also likely to be launched. The Insurance Bill also paves way for reinsurance companies to enter the market by opening branches. Earlier they were allowed to operate only through a JV with 26% cap on FDI, but now the new Bill will help reinsurance business evolve as more experienced reinsurance companies come as a foreign branches.”
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Quote form – Deepak Mittal, MD & CEO, Edelweiss Tokio Life Insurance on Insurance Bill
With this move some kind of political consensus has emerged and we see this as an important event in kick starting the reform process again. From an international investor community point of view this was a long awaited move and therefore will help in regaining their trust in the Indian economy and polity.
For the insurance industry the passing of the bill will help in putting in place a more progressive regulatory framework. The FDI/FPI limit increase will lead to capital inflows which could be used to expand distribution and to invest technology and service infrastructure.
Source : Lokesh Shastri