The move comes at a time when the government’s liberalization of the
insurance and pension sectors has not brought in the desired results. Investors will not have to approach the Foreign Investment Promotion Board for increasing their stakes.
New Delhi: In a move towards further liberalizing foreign
direct investment (FDI), the government on Monday announced that
overseas investment up to 49% in the insurance and pension sectors will
be allowed under the automatic route.
This means that investors will not have to approach the Foreign Investment Promotion Board (FIPB) for increasing their stakes.
However, the existing guidelines on Indian management and control
will have to be verified by the respective regulators, the Insurance Regulatory and Development Authority of India and the Pension Fund Regulatory and Development Authority.
The move comes at a time when the government’s liberalization of the
insurance and pension sectors has not brought in the desired results.
While no investors have come forward in the pension sector, the
number of investors who have increased their stake in insurance
companies is also limited.
Last year, the government had increased the foreign investment cap in
insurance and pension to 49% from 26%, respectively, subject to the
condition that ownership and control remains with the Indian promoter at
all times.
However, confusion over what constitutes ownership and control and
the implication of the increased foreign investment holdings of the
Indian parent on the insurance and pension subsidiaries had stalled
fresh investments.
The budget also announced 100% FDI in asset reconstruction companies through the automatic route.
The existing 24% limit for investment by foreign portfolio investors
(FPIs) in central public sector enterprises, other than banks, listed in
stock exchanges, will be increased to 49% to obviate the need for prior
government approval.