Union Finance Minister Nirmala Sitharaman on Monday said that raising the FDI limit in the insurance sector to 74 percent is a necessary move to help insurers handle issues pertaining to financial stress.
She said this while tabling the Insurance (Amendment) Bill, 2021 for consideration in the Lok Sabha.
The amendment bill, that proposes to raise the FDI limit in insurance from 49 percent to 74 percent, was cleared by the Rajya Sabha last week.
The minister said that insurance companies are subjected to solvency related issues. She stated, “If growth capital is hard to come by, there will be a stress situation. In order that the stress situation is not left unattended, we need to raise the FDI limit.”
The minister stated that COVID-19 pandemic has escalated the woes of the insurance companies.
Sitharamann said that the FDI limit was being raised on the basis of the regulator IRDAI’s recommendation which was issued after extensive consultations with the stakeholders.
The minister said that the FDI inflow in the insurance sector had grown massively post the centre’s move to raise the cap from 26 per cent to 49 per cent in 2015.
The minister said that around Rs 26,000 crore has come as FDI in the insurance sector since 2015, she and the asset under management (AUM) in this sector too have increased by 76 pe cent during the last five years.