Our Bureau New Delhi/Hyderabad, Oct. 31 The Union Cabinet has given its approval for the introduction of the Insurance (Amendment) Bill, 2008 to increase the upper cap of foreign direct investment from the current 26 per cent to 49 per cent.

The decision was taken on the basis of the recommendation of a Group of Ministers (GoM) constituted to study the issue, the Finance Minister, Mr P. Chidambaram, told newspersons here on Friday.

The Bill, however, was unlikely to be passed by the present Lok Sabha due to lack of time, he added.

The Cabinet also decided to introduce the Life Insurance Corporation (Amendment) Bill, 2008 in the Lok Sabha on the basis of the recommendations of the GoM. “LIC (Amendment) Bill, 2008 is being tabled. This is one short bill that raises equity from Rs 5 crore to Rs 100 crore,” Mr Chidambaram said.

It would be tabled separately from other insurance bills like Insurance (Amendment) Bill, 2008, General Insurance Business (Nationalisation) Act, 1972, and Insurance Regulatory and Development Authority (IRDA) Act, 1999.

“Both the amendments will remove archaic and redundant provisions in the legislations and incorporate certain provisions to provide IRDA with flexibility to discharge its functions effectively and efficiently,” he said.

Meanwhile, the insurance industry has welcomed the move.

“We are delighted that the increase in FDI to 49 per cent has been approved by the Cabinet and we look forward to the Bill being approved soon. A simple calculation shows that raising the FDI limit to 49 per cent may increase the total FDI in the life insurance industry by almost 2.5 times from the current levels of approximately Rs 2,500 crore,” Mr T.R. Ramachandran, Designate - MD & CEO, Aviva India, said in a statement.

Increasing FDI would also help the insurance sector to further expand, launch innovative distribution channels, upgrade technology, enhance the current product portfolio and bring in global best practices, he added.

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