The Government also promulgated the ordinance for raising the overseas investment limit in the insurance sector from the existing 26 per cent to 49 per cent. The ordinance route was taken by the Government, after the Opposition did not allow the Rajya Sabha to function during the last few days of the just concluded Winter Session of Parliament and in the process the crucial Insurance laws (Amendment) Bill 2008, could not be passed there.
The Insurance Bill, which has been pending since 2008 in the Rajya Sabha, seeks to increase the composite foreign investment limit in insurance companies to 49 per cent from current level of 26 per cent. The 49 per cent cap would include both FDI and foreign portfolio investments.
The proposed hike in foreign investment limit to 49 per cent in the insurance sector has the potential to attract up to $7-8 billion (about Rs 50,000 crore) from overseas investors, thus giving a major boost to the segment. The total capital deployed in the private life insurance sector is close to Rs 35,000 crore.