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A group of multinational insurers today made a strong pitch for raising the Foreign Direct Investment (FDI) limit in the insurance sector to 49 per cent from 26 per cent at present.
"Uncertainty in increasing the cap is impacting business plans of the current joint ventures and has led to a delay in the entry of other foreign companies in the insurance space in India," the insurers argued.
"An increase in the limit would improve insurance penetration in India while bringing in more stable and long-term capital flows into the country," they added.
"We know the change (in FDI cap) is supported by the insurance regulator. Many Indian companies need capital. We request Parliament to carry out reforms that are needed," former US ambassador Frank Wisner, who brought the MNCs for a round table discussion on insurance, told reporters.
The insurers said their companies were willing to invest for the long-term in India. They urged the government to meet India's implicit commitment to increase the ceiling in a "conscionable period of time" and make it consistent with FDI policy for every other segment such as banking, asset management, investment banking and securities broking.
The Insurance Amendment Bill, which seeks to raise the FDI cap in private sector insurance companies to 49 per cent from 26 per cent, has already been approved by the Cabinet and is now expected in the upcoming Budget. The Opposition is against raising the ceiling. The Parliamentary Standing Committee on Finance, headed by senior BJP leader Yashwant Sinha, had recommend retaining the limit at 26 per cent.
Wisner said the entry of foreign companies in the insurance market has resulted in expanding the product basket. He said the move to consider the Insurance Bill proposing higher FDI was timely for various reasons, including India's appetite for foreign capital.
David Wolf, Chief Operating Officer, Aegon Asia, said his company, which is a relatively new entrant in India, would like to increase its stake in the Indian joint venture with Religare to 49 per cent once the FDI limit was increased.
The speakers agreed that the uncertainty on the time it would take to increase the limit was affecting both domestic companies and their foreign partners as they were not able to plan their business well. Moreover, some foreign companies which were interested in coming to India had put their plans on hold due to lack of clarity, they said.
"Bringing certainty would help both domestic and foreign insurers decide whether they want to stay invested or not," said AIG India Chief Executive Sunil Mehta.
There are 52 insurance companies operating in India of which 24 are in the life insurance business and 27 are in the general insurance business.