New Delhi: Finance Minister Nirmala Sitharaman said that the foreign direct investment (FDI) limit will be hiked to 74 percent from 49 percent in the insurance sector in her Union Budget 2021 speech in Parliament on Monday (February 1).
The Finance Minister proposed to amend the Insurance Act 1938 to increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies, allowing foreign ownership and control with safeguards.
Presenting Union Budget 2021-22, Finance Minister said: "I propose to amend the Insurance Act 1938 to increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards."
The majority of the directors on the board of these insurance companies will have to be resident Indians, she said, adding "Under the new structure, the majority of directors on the board and key management persons would be resident Indians, with at least 50 per cent being independent directors."
She said that the majority of the directors on the board of these insurance companies will have to be resident Indians.
When the 49 percent insurance FDI limit was implemented in 2015, the ‘Indian management control’ clause was inserted into the Act. This clause stated that all major board decisions, strategies and appointments could be done in Indian insurance companies only if a majority of the Indian shareholders give their nod.
After the BJP government came into power in 2019, the first proposal was to increase the FDI cap in the insurance sector to 74 percent. This was to ensure that the insurance sector gets additional investment.
Although the expectation was that the insurance sector would get fresh capital of Rs 25,000 crore, the actual infusion into the business was just around Rs 5,400 crore after the 2015 FDI hike. The rest was local firms selling their stakes to foreign joint venture partners.
Notably, the government also budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including 2 PSU banks and one insurance company, in the next fiscal year.
Unveiling the PSE policy in Budget 2021-22, Sitharaman said barring four strategic areas, public sector companies in other sectors will be divested. The policy would give a clear roadmap for disinvestment in strategic and non-strategic sectors.
She said the strategic sale of IDBI Bank, BPCL, Shipping Corp, Container Corporation, Neelachal Ispat Nigam Ltd, among others, would be completed in 2021-22 fiscal year beginning April 1. Also, legislative amendments required for LIC IPO would be brought in 2021-22.
She said NITI Aayog has been asked to work on the next list of central public sector companies for strategic disinvestment.
Sitharaman said a revised mechanism for fast-tracking closure of loss-making PSUs would be worked out and an incentive package would be developed to incentivise states to sell stake in state PSUs.
To monetise lands owned by CPSEs, a special purpose vehicle (SPV) would be developed.
(With Agency Inputs)
