The Central Government has notified the Indian Insurance
Companies (Foreign Investment) Amendment Rules 2016
The Amendment, which has come into force from 16 March 2016, has
introduced the following changes to the Indian Insurance Companies
(Foreign Investment) Amendment Rules 2015 (Insurance FDI
Rule 5 of the Insurance FDI Rules has
been substituted with the following "The Foreign
Investment proposals up to49 per cent of the total paid up
equity of the Indian Insurance Company shall be allowed on the
automatic route subject to verification by the Insurance Regulatory
and Development Authority of India."
Rule 6, which provided that
"Foreign Direct Investment proposals which take the total
Foreign Investment in the Indian Insurance Company above 26 per
cent and upto the cap of 49 per cent shall be on the FIPB route,
and shall require FIPB approval subject to compliance of the
provisions of the Act." [sic] has been deleted.
The notification of the Amendment is a step towards
operationalising the Finance Minister's statement in his Budget
Speech (2016) on allowing up to 49 per cent FDI in the insurance
sector under the automatic route. However, for this Amendment to
become effective: (i) the Department of Industrial Policy and
Promotion will need to publish a press release amending the
Consolidated FDI Policy and (ii) the relevant foreign exchange
regulations will need to be amended. We expect these to occur in
While this is a move towards liberalising FDI in the insurance
sector, it may be noted that approval of the Insurance Regulatory
and Development Authority of India will continue to be required for
a transfer of shares of an Indian insurance company exceeding 1 per
cent of the paid up equity capital of the insurance company.
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