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The Reserve Bank of India (RBI) on Wednesday notified the government's decision to raise foreign direct investment (FDI) limit in the insurance sector to 49 per cent.
"The extant FDI policy for insurance sector has since been reviewed and further liberalised. Accordingly, with immediate effect, FDI in insurance sector shall be permitted up to 49 per cent subject to the revised conditions," RBI said.
According to the guidelines, for FDI beyond 26 per cent and up to 49 per cent, government approval is needed.
With this, it has included a new term 'Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999' under the definition of 'Insurance'.
The RBI notification follows a press note in March from the commerce ministry's Department of Industrial Policy and Promotion (DIPP) regarding operationalisation of increased FDI limit of up to 49 per cent in the insurance sector.
"Consolidated FDI policy, effective from April 17, 2014 is amended," said the press note from the DIPP.
Press notes are official documents issued by DIPP through which new FDI policies or changes in existing ones come into effect.
According to the guidelines, FDI of up to 26 per cent come under automatic route and for beyond 26 per cent and up to 49 per cent, government approval is needed.
"An Indian insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian entities. Any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by the Reserve Bank under the Foreign Exchange Management Act, 1999," RBI added.
