New Delhi: Finance Minister Nirmala Sitharaman said on Monday that raising the FDI limit in the insurance sector to 74 per cent was necessary to help insurers deal with issues concerning financial stress.
She said this while moving the Insurance (Amendment) Bill, 2021 for consideration and passage in the Lok Sabha.
The amendment bill, that seeks to hike the FDI limit in insurance from 49 per cent to 74 per cent, was passed by the Rajya Sabha last week.
The insurance companies are facing solvency related issues, she said, adding, "if growth capital is hard to come by, there will be a stress situation. In order that the stress situation is not left unattended, we need to raise the FDI limit."
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 come as FDI in the insurance sector since 2015, she said, adding the asset under management (AUM) in this sector too have grown by 76 per cent during the last five years.
Later, initiating the debate on the bill, Manish Tewari (Cong) said when the BJP was in the opposition, it opposed an increase in FDI. He said the then UPA government could not breach the wall put by late Sushma Swaraj and Arun Jaitely 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 hike in 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 to keeping in mind the interests of people.