New Delhi: Union Cabinet on Saturday approved amendments to permit Foreign Direct Investment (FDI) in Life Insurance Corporation of India (LIC) and further simplified and enhanced the existing FDI Policy.
Now, FDI up to 20 per cent under the automatic route is allowed in LIC, government officials said. Other minor enhancements in the existing FDI Policy have also been carried out in order to provide an updated, consistent and easily comprehensible FDI framework.
The Government has already approved listing of shares of LIC on the stock market through an IPO by part-sale of Government stake in it and raising fresh equity capital for LIC. However, the existing FDI Policy did not prescribe any specific provision for foreign investment in LIC which is a statutory corporation established under LIC Act, 1956.
As per the FDI Policy, FDI in permitted sectors is allowed up to the limit indicated against each sector/activity subject to applicable laws/regulations. “Insurance” is a permitted sector under Para 5.2.22 of the FDI Policy. However, the FDI Policy currently lists only “Insurance Company” and “Intermediaries or Insurance Intermediaries” under the “Insurance” sector.
LIC being a statutory corporation, is not covered under either “Insurance Company” or “Intermediaries or Insurance Intermediaries”. Further, no limit is prescribed for foreign investment in LIC under the LIC Act, 1956; the Insurance Act, 1938; the Insurance Regulatory and Development Authority Act, 1999 or regulations made under the respective Acts.
Since as per the present FDI Policy, the FDI ceiling for public sector banks is 20 per cent on government approval route, it has been decided to allow foreign investment up to 20 per cent for LIC and such other bodies corporate. In order to expedite the capital raising process, such FDI has been kept on the automatic route, as is in the case of rest of the insurance sector.
“With an intent to improve and enhance the overall FDI Policy, certain changes and alignments under various provisions of the FDI Policy, are also carried out in order to provide greater clarity and updated, consistent and easily comprehensible FDI framework,” a statement said.
FDI inflows in India stood at US$ 45.15 billion in 2014-2015 and have increased since then. Despite the COVID-19 pandemic, India attracted the highest ever FDI inflows of US$ 81.97 billion during the financial year 2020-21 and this is 10 per cent higher as compared to the previous financial year 2019-20 (US$ 74.39 billion). These increasing trends in India’s FDI are an endorsement of its status as a preferred investment destination amongst global investors.
