Ex-SBI chairman Khara to head panel to implement amendment to insurance law

Highly placed sources in the insurance sector clarified that the panel will not propose any further amendments and that its mandate is to work on the proposed amendments

The Insurance Regulatory and Development Authority of India (Irdai) has set up a seven-member committee headed by former chairman of State Bank of India (SBI) Dinesh Khara to look into the proposed amendments to the Insurance Act, 1938 and suggest a framework for implementation of the same.

 

The finance ministry has proposed to amend various provisions of the Act, including raising foreign direct investment (FDI) in the insurance sector to 100 per cent, reduction in paid-up capital, and provision for composite licence, among others.

 

The other members of the panel are: N Kannan, former chief executive officer (CEO) of ICICI Prudential Life Insurance; Saurabh Sinha, former executive director (ED) of the Reserve Bank of India (RBI); Girish Radhakrishnan, former chairman and managing director (CMD) of United India Insurance; Alok Mishra MD & CEO of Micro Finance Institutions Network (MFIN); Rakesh Joshi, former member of Irdai; and L Vishwanathan, a legal expert.

 

Highly placed sources in the insurance sector clarified that the panel will not propose any further amendment and the mandate is to work on only those proposed.

 

“Once amended, the Insurance Act will have a lot of enabling provisions, for example, pertaining to 100 per cent FDI, penetration, and entry of new players. The mandate of the committee is to set boundaries. The committee will see how those provisions can be enabled through regulations and circulars,” said a source.

 

“The regulator wants to be in a state of readiness before the Act is amended,” the source added.

 

The Insurance Act, 1938 provided a broad legal framework within which the industry operates. It also led to establishment of Irdai as a regulator for the industry. It details the various types of insurance policies across life, general, and health insurance that can be offered in India.

 

In the Union Budget, Finance Minister Nirmala Sitharaman had announced the proposal to increase the FDI limit in the Indian insurance sector from 74 per cent to 100 per cent. The minister also said that the Centre was working on more reforms in the sector.

 

Last week, M Nagaraju, secretary, Department of Financial Services (DFS), said internal consultations have been completed for the Insurance Amendment Bill, which will include details regarding investments and repatriation of profits, in case of FDI. The composite licence in insurance is also part of the reforms.

 

“We have almost completed the internal governmental consultations. Then, we will take the next course of action. Along with this, there are also other rules, how the investments will be made and the profits will be repatriated if there is FDI. That will also be part of the proposed amendment Bill, which will be brought to Parliament,” Nagaraju said.

 

“Once it is approved, those rules also will be notified, so that all the reforms we intend to do in the insurance sector to improve penetration will be done through these measures.... Composite licence is also part of the reforms,” he added. 

IN PROCESS

 

*  Panel’s mandate is to focus on implementing proposed Insurance Act amendments, not suggesting new ones

 

*  The Insurance Act amendments include 100% FDI, reduced paid-up capital, composite insurance licenses

 

*  Committee will see how these provisions can be enabled through regulations and circulars

 

*  Internal consultations completed; Bill to be introduced in the Parliament soon, DFS secretary had said