The Lok Sabha on Monday cleared the Insurance (Amendment) Bill, 2021, which seeks to hike the FDI limit in insurance from 49 per cent to 74 per cent.
Replying to the debate in the Lok Sabha, Union Finance Minister Nirmala Sitharaman said the Bill had been taken up after due consultations and was not being “pushed” as alleged by some Opposition members.
The FM said the government “is not selling family silver (as alleged by some Opposition members) but strengthening India’s insurance sector”, adding that public sector undertakings would continue and it was all about “right sizing”.
The amendment bill was passed by the Rajya Sabha last week.
“The recommendations are strong that is why we have gone ahead with raising the cap. The amendment is to raise the FDI cap and has nothing to do with LIC,” the FM said,
“No one will take away our insurance money outside the country, rather we will get the profit,” she said.
“There is financial stress in the market,” she said to observations on liquidity.”The insurance companies are facing solvency-related issues and 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.
Sitharaman said, “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.”
Sitharaman said the Covid pandemic had further added to the woes of the insurance companies. The FDI limit was being raised on the recommendations of the regulator IRDAI which had held extensive consultations with the stakeholders, she added.
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 that the asset under management (AUM) in this sector had also grown by 76 per cent during the last five years.
Initiating the debate, Anandpur Sahib Congress MP Manish Tewari said when the BJP was in 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 Jaitley in both Houses of Parliament.
The decision to hike the FDI limit was like a somersault by the BJP, he said, also accusing the government of “selling the family silver”.
He also referred to certain parliamentary committees where senior BJP leaders (including former FM Yashwant Sinha) had opposed hike in FDI.
Tewari said though the bill is small it had large implications.
Defending the bill, BJP’s Jagdambika Pal said the measure is in favour of India’s growth story. He said while the FDI in the insurance sector would be increased, the government had put in place sufficient safeguards to keeping in mind the interests of people.