FM promises safeguards; Rajya Sabha passes Bill to hike FDI in insurance

Bill provides that no insurer shall invest policyholders' funds outside India, says government

The Bill to hike the foreign direct investment (FDI) limit in the insurance sector to 74 per cent provides adequate safeguards so that control, ownership, and money collected from policyholders stays within the country, Finance Minister Nirmala Sitharaman told Parliament on Thursday. 

Insurance is a highly regulated sector where every product, its pricing, investment and marketing is regulated in the country, Sitharaman said in response to a debate on the Bill in the Rajya Sabha. The Bill was later passed by the Upper House. 

The decision to increase the FDI limit from the current 49 per cent was taken after the sector’s regulator Insurance Regulatory and Development Authority of India (Irdai) held detailed consultations with stakeholders, she added. 

“The regulator also flagged this point that if FDI has to be raised, it has to be raised with adequate safeguards...very clearly looking at both aspects of control and ownership, and also the (policyholders’) money does not go out of the country,” Sitharaman said.

The Bill provides that no insurer shall, directly or indirectly, invest policyholders’ funds outside India, Sitharaman said. Indian companies that have foreign investment will also be required to retain a specific percentage of profits as a general reserve, the finance minister said. 

Rules will be made that would prescribe conditions to ensure meeting of policyholder claims, regardless of a foreign investors’ own financial condition, she added.

“That is something which I want to underline that money which is going to be the general reserve, even if the insurer promoter gets into difficulty, that money is there for you to pay every insured member’s claim,” Sitharaman said. Apart from this, a majority of directors, key management persons of the Indian insurance companies will be resident Indians, bringing them under the purview of Indian laws and codes, she said. 

Fugitives coming back

Sitharaman said fugitive businessmen Vijay Mallya, Nirav Modi, and Mehul Choksi are “coming back to India to face the law”. The government is pursuing Mallya’s and Modi’s extradition from the UK, while Choksi is believed to be in Antigua.

Mallya, an accused in bank loan default case of over Rs 9,000 crore involving his defunct Kingfisher Airlines, has been in the UK since March 2016.

Nirav Modi and his maternal uncle Choksi fled the country allegedly after committing fraud in the public sector lender Punjab National Bank. Modi is accused of committing a fraud of USD 2 billion (around Rs 14,500 crore) in the PNB.