Insurance sector is currently at unstable equilibrium: Irdai chief

Regulators set the agenda as insurance, pensions, digital currency, cyber risk, and crypto policy took centre stage on the penultimate day of the leading summit

Three of India’s biggest financial regulators set the tone for discussions on the second day of the Business Standard BFSI Insight Summit 2025. The day kicked off with a fireside chat with Ajay Seth, chairman of the Insurance Regulatory and Development Authority of India (Irdai), who assured stakeholders that as a regulator he has an open mind. 

“As a regulator, this being my first appearance, I would like to assure that I have an open mind. Based on data, analysis, and the perspectives I hear, I reach a conclusion. But nothing is done without extensive consultation, generating discussion, and building consensus,” said Seth. His comments would be reassuring for an industry battling muted growth in new policies and premium income. 

 

“The insurance sector, and especially the health insurance sector, is at an unstable equilibrium at the moment. On the life side, there is a low-efficiency equilibrium happening. But other sectors that manage the savings pools of Indians are giving tough competition to life insurance companies,” he said. 

On the question of more capital for the insurance industry, he said that allowing 100 per cent FDI alone cannot meet the sector’s capital needs. “The own capital of the  insurance industry is about ₹3.5 trillion, both life and non-life put together. Out of this, FDI is only ₹80,000-90,000 crore.”

 

The government’s plan to allow foreign direct investment (FDI) of up to 100 per cent in the insurance sector could also pave the way for global pension fund managers to enter the market without joint venture partners, as the FDI norms under insurance and pension laws are “joined at the hip”, Pension Fund Regulatory and Development Authority (PFRDA) Chairperson S Ramann indicated in a fireside chat. Currently, FDI is permitted up to 74 per cent in the pension fund management space. 

Stressing the need to enhance pension coverage in the country, Ramann also said the regulator is considering allowing smaller pension fund houses, on the lines of small finance banks regulated by the Reserve Bank of India. Such funds, with lower capital requirements, could offer products for underserved sections of the population in tier-III cities, MSME clusters, and rural communities that may not have any social security cover. 

In all, there were 15 sessions on the second day of the summit, with top executives from life insurance, general insurance, private equity, the payments industry, wealth management, and the microfinance industry presenting the way forward for their sectors. 

Reserve Bank of India Deputy Governor T Rabi Sankar said that internationalisation of the Indian rupee is not intended to replace the dollar but to reduce risk for Indian businesses by enabling more transactions in rupees. “If you look at the Reserve Bank’s stance on capital account convertibility, we have fairly consistently been saying that it is a process, not an event. In this spirit, we have gradually been liberalising the capital account. Today, barring a few constraints like cost caps and amount limits on ECBs (external commercial borrowings), most inward capital flows are liberalised,” he said. 

According to Sankar, the regulator is currently focused on liberalising inward capital flows given the country’s need for capital at its current stage of development, but as the Indian economy matures, it will look at outward capital flows. 

“Trade is largely free, with only procedural requirements such as repatriation timelines. We have already released two draft proposals to simplify trade regulations, reducing over 100 directives to a single comprehensive framework. ECB liberalisation is part of this broader effort. Our priority remains on facilitating inflows of capital first, followed by calibrated outflows,” he said.

The RBI deputy governor also deliberated on Central Bank Digital Currency (CBDC) and politely brushed off suggestions that it had failed to take off. “We are not rushing it because most countries are still experimenting and studying its impact. Over 10 crore transactions have taken place, but we are going slow to understand potential effects -- for instance, whether CBDCs could replace bank deposits. We are technologically ready, but our approach is cautious,” he remarked. 

Top executives in the wealth management industry said that India’s growing economy is a major tailwind for them. The industry is entering a defining phase as a swelling pool of high-net-worth (HNI) and ultra-high-net-worth individuals (UHNI) fuels demand for sophisticated financial advice and innovative investment products. 

India’s millionaire households have nearly doubled since 2021, with smaller towns and cities contributing significantly to the growth. This surge, driven by economic expansion and a shift towards financialisation, is transforming the wealth management landscape, making services more accessible and technology-driven, most panellists echoed. 

Executives from the microfinance industry (MFI) said the worst is behind them after recent quarters marked by liquidity stress, rising delinquencies, and slowing disbursements. “Now the situation is better. We have requested the government to institute a larger guarantee fund of, say, ₹ 20,000 crore, which will kick-start the virtuous cycle of funding and give confidence to banks,” said Alok Misra, CEO of the Microfinance Industry Network (MFIN). 

Another high point of the penultimate day was a fireside chat with Arundhati Bhattacharya, former banker and now chairperson and CEO of Salesforce India, and one of the country’s top women business leaders. “If you’re a woman in India with a career, you have to continuously calibrate how to take care of family responsibilities while taking on newer responsibilities at work. There will be times when you feel it’s not worth it, but you need to accept that this is how it will be and find a way to still get ahead,” she said. 

Executives from the payments industry assured that Indian financial sector customers are relatively safer thanks to the Reserve Bank of India’s stringent requirements from the industry, even as they await implementation of the data privacy Bill. 

Deep Narayan Mukherjee, partner at Boston Consulting Group (BCG), said: “Data breach is one aspect of a cyberattack; the other is ransomware, which is not related to your customer. There are more and more instances globally in the last two or three months where non-customer-centric organisations’ businesses have been hacked.” He was speaking at a session on 'Trust No One, Verify Everything: Cybersecurity for the Digital Age'. 

At the general insurance panel discussion, the chiefs of general insurance companies highlighted that, with a surge in climate-related disasters, cyber threats, and emerging workplace models, there needs to be stronger collaboration between insurers, government, and technology partners to address these “new-age risks”. They also said there is a need to build comprehensive frameworks to protect people and businesses against digital fraud, climate catastrophes, and the risks associated with electric vehicles and the gig economy. 

At the life insurance panel discussion, the chiefs of life insurers said that the recent GST reforms will make insurance more affordable and inclusive in India. The GST exemption in insurance will help reduce premiums, enhance affordability, and signal the government’s strong focus on insurance as an essential life necessity. 

Crypto industry leaders and policymakers urged the government to introduce clear regulations for digital assets, warning that prolonged uncertainty is driving innovation and talent overseas. 

In a panel titled India’s Crypto Crossroads: Time for a Policy Rethink?, Dilip Chenoy (Bharat Web3 Association), Sumit Gupta (CoinDCX), G Padmanabhan (former executive director, RBI), and S B Sekar (head of APAC, Binance) said India risks missing a $1.1 trillion opportunity by delaying policy action. They also called for an INR-backed stablecoin to reduce remittance costs and strengthen India’s monetary sovereignty. 

Padmanabhan cautioned that with 97 per cent of stablecoins pegged to the US dollar, India must act to avoid dollar dominance. Gupta added that “the best time to regulate was yesterday; the next best is today.” While panellists were divided on creating a separate regulator, they agreed that India must move fast on principle-based, flexible rules that balance innovation and oversight. Without clarity, they warned, India’s Web3 and blockchain talent will continue to leave for friendlier markets, eroding its leadership in digital finance.