Govt. amends FEMA to enable the increase in FDI Limit in Insurance Sector [Read Notification]

The Government notified the amendment in the Foreign Exchange Management (non-debt instruments) Rules, 2019 (FEMA) to enable the increase in foreign direct investment limit in the insurance sector upto 74%.

In the Foreign Exchange Management (Non-debt Instruments) Rules 2019, in Schedule 1, in the Table, (i) against Sl. No. F. 2.1, for entry (c), the flowing entry shall be substituted, namely “Applications for foreign direct investment in private banks having joint venture or subsidiary in insurance sector may be addressed to the Reserve Bank for consideration in consultation with the Insurance Regulatory and Development Authority of India, in order to ensure that the limit of foreign investment application for the insurance sector as specified in serial number F. 8.1 and F. 8.2 is not breached.”

Against Sl. No. F. 8.1, in column (3), under the heading “Sectoral Cap,” for the entry, the following entry shall be substituted, namely “74%”.

As per Foreign Exchange Management (non-debt instruments) (second amendment) Rules, 2021, applications for FDI in private banks having joint ventures or subsidiaries in the insurance sector may be addressed to the Reserve Bank of India for consideration in consultation with the Insurance Regulatory and Development Authority of India to ensure that the limit of foreign investment of 74% for the insurance sector is not breached.

As per the rules, the insurance companies must have 50% of their directors as independent directors unless the chairperson of its board is herself or himself. In that case, at least one-third of its board should have independent directors. Foreign-owned insurance companies are also mandated to have the majority of their directors and key management persons as resident Indians.

In the Budget session earlier this year, the Parliament approved the raising of the FDI limit in insurance from 49% to 74%.

To Read the full text of the NotificationCLICK HERE

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