Not much noise is heard from the Indian insurance industry about increasing FDI (FDI) to 100 percent from the current 74 percent as their budget wish list.
In the past, top officials in the sector would make a high-decibel pitch for the demand to increase the FDI cap.
Earlier, the life insurance sector had argued that the increase in FDI from 26 per cent to 74 per cent would generate additional capital of Rs 50,000 crore.
Incidentally, many foreign shareholders of Indian insurance joint ventures did not increase their stake to the permitted 74 percent and the specified amount did not materialize.
“Amid expectations on the budget, the proposal to raise the FDI limit in insurance to 100 per cent is unlikely to be introduced in the upcoming budget, especially as the FDI limit has recently been increased to 74 per cent,” Anup said. SixMD and CEO, Future Generali India Insurance On pre-Budget expectations.
However, he said the industry should have this dialogue with policy makers to allow 100 percent FDI. According to him, one of the challenges for global insurance companies is finding a suitable local partner.
“With more than 60 insurers between life and general insurance and a large number of them joint ventures, there is really a severe shortage of local partners who have the ability or willingness to enter this space,” said Rao. See, this isn’t even a request for sector participants. A sector currently dominated by domestic majority players, why do they want 100 per cent FDI,” Avinash SinghSenior Research Analyst, MK Global Financial ServicesIANS
Singh noted: “Practically speaking, even 74 per cent is mostly non-starter. Any foreign investor interested in owning a majority, the domestic promoter cannot exit or become a minority.”
He added: “Even the valuation of these companies is demanding. And if more than 50 per cent FDI is welcomed, the protest names are not interested in any foreign investor.”