Need safeguards before raising FDI limit to 100% in insurance: Parl Panel

A Parliamentary Panel on Wednesday urged the government to put safeguard measures in place to counter concerns like profit repatriation while raising the foreign direct investment limit to 100 per cent in the insurance sector.

The Standing Committee on Finance, in its report, said the downside of the FDI in India's insurance sector should be dealt with adequately and scrupulously.

The Committee would like to emphasise the need for some safeguard measures to be in place to counter concerns like profit repatriation i.e. foreign investors sending earnings back to home countries rather than reinvesting in India; reduced decision-making power of domestic firms; job security concerns arising due to potential automation and cost-cutting measures; focus on high-margin policies, neglecting rural and financially weaker sections etc, it said.

With regard to the integration of InsurTech (Insurance Technology) in the sector, the report said it has the potential to enhance efficiency, customer experience and risk assessment through digital innovation, as advanced digital technologies, such as Artificial Intelligence(AI), big data analytics and blockchain, can streamline underwriting, claims processing and risk assessment, making insurance more accessible and efficient.

Wider adoption of digital platforms will enable insurers to reach underserved rural and semi-urban markets. Thus, driving inclusive growth and strengthening India's insurance ecosystem, the panel said in its report.

Finance Minister Nirmala Sitharaman in the Budget had announced to raise the foreign direct investment (FDI) limit from 74 per cent to 100 per cent.

The proposed removal of the FDI cap under the Insurance Laws (Amendment) Bill, 2025, is aimed at attracting stable foreign investments, enhancing competition and facilitating technology transfer, ultimately leading to better insurance products, improved customer service and more affordable premiums.

The Committee are of the opinion that this step may aid in the adoption of best global practices and help to improve insurance penetration and density in the country, the report said.

With regard to the movement of bank deposits to the stock market, the panel headed by BJP leader Bhartruhari Mahtab said a comprehensive, multi-faceted approach is necessary for the banking sector.

The decline in financial savings presents a liquidity challenge for banks, limiting access to low-cost funds, the report added.

In response to the decline in the Current Account Savings Account (CASA) deposit ratio, it said there is a need for banks to diversify funding sources, optimise operations and leverage AI-driven automation to enhance efficiency, reduce costs and drive digital banking innovations.

There is a need for proactive addressing of liquidity concerns, enhancing customer attraction, especially in underserved areas, and leveraging technology for operational efficiency so that banks can mitigate the impact of declining CASA ratios and maintain their role as stable and reliable financial institutions in the future, the report suggested.

On the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, the panel made a case for ensuring that accounts opened under the scheme are active and not dormant or fraudulent and desired rigorous verification of account details and regular audits of account activity should be conducted.

"Discrepancies should be thoroughly investigated and accounts that are inactive for prolonged periods or found to be fraudulent should be deactivated," it said.

In another report on Demands for Grants (2025-26) of the Ministry of Finance (Department of Revenue), the panel said utmost efforts should be made to expedite and complete the remaining work related to GST Appellate Tribune (GSTAT), ensuring it is operationalised at the earliest so that the envisaged benefits can be reaped without any further delay.

The panel expressed that while genuine demands should be strictly collected, the Tax Authorities should also undertake a thorough introspection of the existing tax assessment system and remain sensitive to the hardships faced by honest taxpayers due to erroneous or inflated tax demands.

"The Committee, therefore, recommend that, since all the tax records have been digitised, it is high time to take decisive interventions, including writing off demands/ imposing moratoriums, to reduce and trueing up the huge backlog of demand arrears in a time-bound manner," it said.

Observing that under the faceless appeal system also, there are instances where taxpayers face challenges with online filing and hearings, as adapting to the digital format can pose difficulties for some individuals, the panel recommended that these issues should be addressed promptly by taking appropriate corrective measures to improve the overall eco-system.