By TIOL News Service

NEW DELHI, FEB 06, 2021: A hike in the Foreign Direct Investment (FDI) cap from 49 per cent to 74 per cent in insurance companies will have a positive impact on the Indian economy, said a top Commerce Ministry official on Friday.

Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), Mr Guruprasad Mohapatra, said allowing foreign ownership would allow global companies to take more strategic and long-term view of the Indian insurance sector, bringing in greater inflow of long-term capital, technology and best practices.

Under the new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50 per cent of Directors being Independent Directors, and specified percentage of profits being retained as general reserve.

"The end consumer will also be benefited from it as it will boost competition, enable consolidation and increase insurance penetration, leading to more innovative and affordable products for the end-consumer," he said.

He said scaling up insurance operations would lead to significant employment of semi-skilled insurance agents and sales force.

"And the strong and vibrant insurance sector will also support long-term investments in infrastructure projects which have long-gestation period," said the DPIIT official.

The proposed increase will bring the insurance sector at par with the private banking sector where FDI up to 74 per cent is allowed. Higher FDI limits will enable insurance companies to meet their capital requirements, thereby reducing the burden on banks, Non-Banking Financial Companies (NBFCs) to raise capital.