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Bill proposing 100% FDI in insurance gets Centre’s nod
The Union Cabinet approved a bill to allow 100% foreign direct investment in the insurance sector, aiming to boost industry reach and infrastructure funding.
The Union Cabinet on Friday approved a bill that allows 100% foreign direct investment in the insurance sector, up from the current 74%, provided the entire premium collected is invested within the country, in a move that is expected to increase the reach of insurance in India, and also make more money available for infrastructure projects.
HT learns that the Insurance Laws (Amendment) Bill, 2025 could be announced in Parliament next week itself. The increase in FDI was mentioned by the finance minister in her budget speech this year.
The proposed 100% FDI in the sector will give significant freedom to foreign companies in managing affairs of their firms with adequate safeguards which will be part of the rules framed in consultation with the sector regulator Insurance Regulatory and Development Authority of India (IRDAI), people familiar with the matter said, adding that the legislation is in lines with the government’s plan to deepen insurance penetration and to achieve “ Insurance for all” by 2047.
The introduction of the bill in the ongoing winter session was part of the business agenda placed during the government’s meeting with leaders of political parties on November 30 the people said, requesting anonymity.
“The insurance bill could be introduced next week, perhaps on Monday, depending on the situation,” one of them said. The session is scheduled to conclude on December 19. Besides allowing 100% FDI in the insurance sector, the government may also bring significant reforms through the bill for ease of doing business and protection of consumers. “The proposed legislation will also simplify certain procedures and rules,” he added.
Union finance minister Nirmala Sitharaman in her budget speech announced the government’s plan to allow 100% FDI in the insurance sector with the condition that the premium be deployed in the country, a move that experts said would make additional funds available to Indian infrastructure projects. “The FDI limit for the insurance sector will be raised from 74% to 100 per cent. This enhanced limit will be available for those companies which invest the entire premium in India,” the finance minister said in her budget speech.
The bill is being introduced as permitting 100% FDI in insurance sector will also require amendments in the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999.
Debashish Banerjee, partner at consultancy firm Deloitte India said: “While the intent to allow 100% FDI in insurance was indicated earlier this year, today’s announcement is a positive step in translating that intent into action.”
“Over the past few months, we have seen growing interest from several global insurers who are actively evaluating India as a long-term market, and greater clarity on ownership norms will help in moving those conversations forward. As the detailed rules, regulations and operational guidelines emerge, this should give investors the confidence to commit capital and capability more meaningfully,” he added.
For the industry, this is a constructive development, Banerjee said. “To enable the sector to scale fully, it will be important to see how the other reforms the government is contemplating come together, so that growth, governance and inclusion progress in parallel.”
According to the second person, the insurance sector has so far attracted ₹82,000 crore of FDI. Foreign insurers were first allowed entry by the Vajpayee government in 2000, when it allowed FDI up to 26%. The sectoral cap was raised to 49% in 2015 and 74% in 2021 with conditions attached.
