This Article is From Jul 31, 2014

Insurance Bill Likely to be Discussed in Rajya Sabha on Monday

Insurance Bill Likely to be Discussed in Rajya Sabha on Monday
New Delhi: The Narendra Modi government's first big reform - the Insurance Amendment Bill - is now expected to come up in the Rajya Sabha on Monday. The government is trying to talk opposition parties into supporting it.

Here's the latest developments in this story:

  1. The Insurance Laws (Amendment) Bill aims to raise the ceiling on foreign direct investment (FDI) in insurance to 49 per cent from the current 26 per cent limit.

  2. This marks a reversal from the BJP's earlier stance when it was in Opposition. It had then opposed raising the cap on FDI in insurance from 26 per cent. But last year it said it was not against raising the limit on FDI in insurance, but wanted certain caveats and conditions to "safeguard the interest of the people".

  3. The 49 per cent FDI that the BJP-led NDA government proposes will be a composite cap - which means that foreign capital can flow in either as direct investment or via the portfolio route, or as a combination of both. So foreign investors can either directly buy equity from the company or can buy shares on the stock market.

  4. The new measures will allow insurance companies to list on stock exchanges.

  5. Barring public sector insurance companies, all other insurance companies will potentially benefit from a higher FDI cap.

  6. To allay fears that Indian entities may lose control, the bill provides that management must remain with India companies. And the approval of the Foreign Investment Promotion Board (FIPB) will be needed on any investment over 26 per cent.

  7. Experts said last week that a higher foreign direct investment limit in insurance could result in inflows of Rs. 40,000 crore to Rs. 60,000 crore over time, and immediate inflows of around Rs. 20,000 crore.

  8. The Insurance bill and the Sebi bill, which aims at giving more teeth to the market regulator, were cleared by the Union cabinet last week, days after Finance Minister Arun Jaitley made a promise to do so in his Budget speech, noting that, "The insurance sector is investment starved. Several segments of insurance sector need expansion."

  9. The BJP has suggested 11 amendments in the bill and had listed it in the Rajya Sabha for today. But the Congress reportedly wants these referred to a select committee.

  10. Insurance was opened up to the private sector in 2000 with the Insurance Regulatory and Development Authority (IRDA) Act, 1999. From seven then, the number of companies operating in the life, non-life, and re-insurance segments has gone up to 53.



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