India eyes FDI cap overhaul for insurers

FDI cap for general or life insurance companies is at 74%.

Sectors such as defence, insurance, and plantations may experience an overhaul in foreign direct investment (FDI) caps, reported the Times of India. 

The Indian government stated this review of the process may streamline a more efficient investment regime and aim to address the stagnating FDI inflows to the country.

The Department for Promotion of Industry and Internal Trade is reviewing investment norms in the defence sector to attract more manufacturing. 

Currently, 100% FDI is allowed where modern technology is involved or for other specific reasons, whilst up to 74% FDI is permitted automatically, but this requires industrial licensing for certain sectors and small arms production, which may be reviewed. 

In the insurance sector, FDI in general and in life insurance companies is capped at 74%, with 100% FDI allowed in insurance intermediaries. 

General insurance companies often become profitable after a few years and generate funds for reinvestment, whereas life insurance requires significant equity infusion from both Indian and foreign partners for six to seven years. 

The review comes amid increased competition, with most life insurance companies now profitable.