Indian Finance Ministry Proposes Amendments to Insurance Act of 1938
• The Finance Ministry proposes amending the Insurance Act of 1938.
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• To increase foreign direct investment (FDI).
• The amendments will promote policyholders’ interests, enhance financial security, facilitate entry of more players, and enhance insurance penetration.
• The requirement of net-owned funds for foreign re-insurers will be reduced from ₹5,000 crore to ₹1,000 crore.
• FDI limit in Indian insurance companies will be hiked from 74% to 100%.
• The Insurance Act of 1938 provides the legislative framework for insurance in India and regulates the relationship between insurers, policyholders, shareholders, and the Insurance Regulatory and Development Authority of India (IRDAI).
India’s FDI
Understanding Foreign Direct Investment (FDI)
• FDI is made by a firm or individual one country into business interests located in another country.
Government Initiatives to Boost FDI
FDI is a major non-debt financial resource for the economic development of India.
• The components of FDI are equity capital, reinvested earnings, and intra-company loans.
• FDI routes include automatic route, government route, and the Foreign Investment Facilitation Portal (FIFP).
• Relaxation of FDI norms across sectors, ‘Make in India’ and ‘Atmanirbhar Bharat’ campaigns, and launch of schemes attracting investments.
• Higher FDI inflows have been possible due to liberal and attractive policy regime, a good business climate, and reduced regulatory framework.
Retaining Growth
• Government policies/decisions are crucial in creating a conducive environment for global investors.
• A sound trade policy and level playing field are necessary for continued foreign investments.