The government approved the much-awaited comprehensive Insurance Bill that seeks to raise foreign direct investment (FDI) cap in private sector to 49 per cent from 26 per cent.

Briefing the media, Finance minister, P.Chidambaram said, “The Cabinet gave its approval for introduction of the Insurance (Amendment) Bill, 2008, for amendment to Insurance Act, 1938, General Insurance Business Act, 1972, and Insurance Regulatory and Development Act, 1999, in the Rajya Sabha on the basis of the recommendations made by the GoM.”

Chidambaram made it very clear that the clause to raise the FDI cap applied only to private insurers and not public sector insurance companies.

However, the Minister believes that the Bill was unlikely to be passed by the present Lok Sabha mainly due to lack of time as it has to go through a parliamentary committee. Normally, a parliamentary committee used to take 6 to 8 months to finalise its report on the proposed Bill.

Apart from amending the Insurance Act, 1938, the Bill also intend to amend the General Insurance Business (Nationalisation) Act, 1972, and the Insurance Regulatory and Development Authority Act, 1999.

Welcoming the cabinet decision, Aviva India MD and CEO designate T.R Ramachandran said, “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.”

Meanwhile, the Left parties have criticized the government’s decision. Speaking with media, CPI national secretary D.Raja said: “The Prime Minister and the finance minister have been saying India has not been impacted by global financial crisis due to its strong fundamentals, created by PSU banks and insurance firms, which the government is now demolishing by opening them up for FDI.”