Online BusinessInsurers wait yet another year for increase in FDI
The year 2009 saw insurance firms waiting for easing of foreign direct investment (FDI) norms, just as they have done every year for the last five years, but there is promise of the law being amended to this effect next year.
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The government had first mentioned raising FDI ceiling in insurance sector to 49 per cent from the current 26 per cent in the 2004 Union Budget and introduced a Bill to do so over a year ago.
The Insurance Laws (Amendment) Bill, 2008, has since been referred to a Parliamentary Standing Committee. The Parliamentary panel"s report is expected before the Budget session in February next year and passage of the Bill is likely during the same year.
Although the global financial meltdown of last year hit top insurers like AIG, life insurers in India have seen new business premium collections rise 10-fold over as many years.
The new premium collection has increased to Rs 86,983 crore in 2009 compared to Rs 8,299 crore 10 years ago when the sector was opened to private players.
There are 23 life insurance companies and 21 general insurers operating in the country, but their growth potential has not been tapped for want for capital -- which could be addressed through raising FDI ceiling.
"The FDI ceiling, if increased, could bring in the much-needed capital for the growth of the sector, as well as for the nation, as insurance players provide long term capital for development of infrastructure," DLF Pramerica Managing Director Kapil Mehta said.