Govt to table insurance bill on FDI hike

Three months after its break up with the Left parties, the UPA government has decided to introduce a bill - one of the three concerning financial sector reforms - to hike FDI cap in private insurance firms.

Three months after its break up with the Left parties, the UPA government has decided to introduce a bill – one of the three concerning financial sector reforms – to hike FDI cap in private insurance firms.

Finance Minister P Chidambaram on Friday announced the decision of the Union Cabinet, which met on Thursday night, to table a comprehensive bill to amend various laws relating to the insurance sector and among other things seek to raise the FDI cap to 49 per cent from 26 per cent now.

The Left parties criticised the decision as one that will demolish institutions that helped India withstand the impact of global financial crisis.

However, private sector insurers hailed the decision to amend the Insurance Regulatory and Development Act, 1999 to raise FDI limit in insurance from 26 to 49 per cent which would enable them to enhance capital for business expansion.

The bill, which was strongly opposed by the Left parties for the last four years, was referred to the Cabinet by a Group of Ministers only after the Left withdrew support to the Congress-led government on the Indo-US nuclear deal issue.

“The Union Cabinet gave its approval for introduction of the Insurance (Amendment) Bill, 2008 for amendment to Insurance Act 1938, General Insurance Business (Nationalisation) Act, 1972, and Insurance Regulatory and Development Act, 1999, in the Rajya Sabha on the basis of recommendations made by GoM,” Finance Minister P Chidambaram told reporters.

However, he said the Bill was unlikely to be passed by the present Lok Sabha, mainly due to lack of time, as it will go to a Parliamentary committee. Parliament, which is having a recess now, will reconvene on 10th December.

FDI cap is proposed to be hiked through amendment to IRDA Act, 1999.