The Insurance (Amendment) Bill, 2021 was passed in the Lok Sabha on Monday, March 22. Finance Minister Nirmala Sitharaman moved the bill in the lower house of the parliament which sought to raise the FDI limit in the insurance sector to 74% from 49%.
Rajya Sabha had already passed the bill last week. FM Sitharaman, while moving the bill for consideration and passage, said that expanding the FDI limit in the insurance sector to 74% was necessary as it will help insurers deal with matters regarding financial stress.
The Finance Minister further stated that the insurance companies are facing solvency-related issues. She added that "if growth capital is hard to come by, there will be a stressful situation" and to ensure that this situation is not left unattended, "we need to raise the FDI limit" in the insurance sector.
The COVID-19 pandemic, Sitharaman said, has further added to the woes of the insurance companies.
The minister observed that the FDI limit was being raised on the recommendations of the regulator, IRDAI, which had held extensive consultations with the stakeholders.
The FDI inflow in the insurance sector, the minister said, had increased significantly after the government decided to raise the cap from 26 per cent to 49 per cent in 2015.
As much as Rs 26,000 crore has been pumped in as FDI in the insurance sector since 2015, she said, adding the assets under management (AUM) in this sector too have grown by 76 per cent during the last five years.
Later, initiating a debate on the bill, Congress MP Manish Tewari said when the BJP was in the opposition, it objected to an increase in FDI. He said the then UPA government could not breach the wall put by the late Sushma Swaraj and Arun Jaitley in both Houses of Parliament.
He said the decision to hike the FDI limit was like a somersault by the BJP.
He also referred to certain parliamentary committees where senior BJP leaders, including Yashwant Sinha, had opposed a hike in the FDI.
Tewari said though the bill is small, it has large implications.
Defending the bill, Jagdambika Pal (BJP) said the measure is in favour of India's growth story.
He also noted that while the FDI in the insurance sector will be increased, the government has put in place sufficient safeguards, keeping in mind the interests of people.