Govt proposes to increase FDI cap in insurance sector to 74 pc     

In the first paperless Union Budget, Finance Minister Nirmala Sitharaman also said investor charter would be introduced as a right of all financial investors across all financial products.

New Delhi: Shares of companies related to the insurance sector closed the day with up to 9 per cent jump on Monday after the government proposed to increase foreign direct investment (FDI) limit in the insurance sector to 74 per cent.

In the first paperless Union Budget, Finance Minister Nirmala Sitharaman also said investor charter would be introduced as a right of all financial investors across all financial products.

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She proposed to amend the Insurance Act 1938 to “increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards”.

“Under the new structure, the majority of directors on the board and key management persons would be resident Indians with at least 50 per cent of directors being independent directors and specified percentage of profits being retained as general reserve,” she said while presenting the Budget 2021-22.

The New India Assurance Company zoomed 8.94 per cent and General Insurance Corporation of India jumped 5.03 per cent on the BSE.

Further, ICICI Lombard General Insurance Company gained 3.84 per cent, HDFC Life Insurance Company gained 3.14 per cent, ICICI Prudential Life Insurance Company 1.90 per cent and SBI Life Insurance Company 1.20 per cent.

“Raising FDI in insurance from 49 per cent to 74 per cent is welcome. Market response to the budget reflects growth optimism,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The government on Monday proposed to increase the FDI limit in the insurance sector to 74 per cent, a move aimed at attracting overseas players.

The Finance Minister proposed to amend the Insurance Act 1938 to “increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards”.

Mayur Dwivedi, Head – Business Strategy and M&A, Religare Enterprises Limited, “This move will allow foreign ownership and control safeguards, help liberalise the sector and improve penetration. The limit hike will also attract enhanced capital flow to the sector and help insurance companies to raise funds.”

This move will help the companies raise fresh capital and enhance growth prospects,” according to Prayesh Jain, Lead Analyst – Institutional Equities at YES Securities.