India removes FDI cap in insurance sector: Sitharaman

New Delhi

Finance Minister Nirmala Sitharaman has announced that the government has raised the Foreign Direct Investment (FDI) limit in insurance companies from 74% to 100%, aiming to attract long-term global investment and boost sectoral growth. The move is part of a larger plan to unlock the full potential of India’s insurance industry.

The Indian insurance sector is expected to grow at a rate of 7.1% annually from 2024 to 2028, faster than the global and emerging market averages. With this policy change, foreign companies no longer need to partner with Indian firms for the remaining 26%, making it easier for them to set up operations independently in India.

“This change will improve competition, promote technology sharing, and enhance insurance access for citizens,” Sitharaman said in a written reply to the Lok Sabha. Section 2(7A)(b) of the Insurance Act, 1938, earlier capped the FDI in insurance firms. Now, promoters can decide on raising foreign shareholding based on business needs and capital requirements.

As of December 12, 2024, the total equity capital of Indian life insurers was ₹24,110 crore, with FDI making up ₹11,529 crore, according to IRDAI data.

Sitharaman also highlighted India’s growing appeal to foreign investors in banking and insurance. At a recent London investor meeting, she presented India as one of the fastest-growing insurance markets among G20 nations, set to become the sixth largest by 2032.

With a growing middle class and steady reforms, India’s insurance sector is now better positioned for global investment and innovation.