Paving the way for the passage of long-pending reforms in the insurance sector, the Select Committee on the Insurance Laws (Amendment) Bill has finalised its report recommending a composite cap of 49 per cent for foreign investment in the sector. Further, it has recommended that the issue of Indian ownership and “control” be clearly defined in the Act.
“We have finalised the report and will submit it to the Rajya Sabha on December 10,” said Chandan Mitra, chairman of the select panel, while declining to give details of the report.
The composite 49 per cent cap would include foreign direct investment, foreign institutional investments, foreign portfolio investments as well as all instruments that may be included as FII at a later date, sources said.
“The cap has been completely ring-fenced,” said a Congress leader, adding that the issue of control has also been suitably addressed based on the Companies Act, 2013. “This addresses all our concerns,” said the Congress leader.
The draft report, sources told The Indian Express, has stated that the term “control” must be defined in the Act itself with an explanation. It has recommended that “it shall include the right to appoint a majority of directors or to control the management or policy decisions, including by virtue of their shareholding or management rights or shareholders agreement or voting rights,” sources said.
The panel has also recommended including the provision to enhance the minimum capital base of health insurance companies to Rs 100 crore from the current Rs 50 crore. Further, the commission for insurance agents should be made mandatory along with the surveyor’s role.
A specific reference should also be included to allow members of Lloyds so that once it establishes a branch for re-insurance in India, eligible members who satisfy IRDA criteria can operate their business.
While the AIADMK and the BJD are understood to have supported the Bill, some parties are still opposed to it. Top sources said the Left parties and the Trinamool Congress would present dissenting notes on Tuesday and the Samajwadi Party and Janata Dal (United) too could do the same.
The CPI(M) will have a dissent note that says there can be no disinvestment in GIC and that the Finance Ministry has failed to explain why it has rejected the parliamentary standing committee’s unanimous report rejecting FDI increase in the insurance sector.
Sources said the Insurance Laws (Amendment) Bill is likely to be placed before Parliament for consideration as early as next week. However, its passage is still unclear. It may be deferred to the next session as some parties do not want it to be enacted before US President Barack Obama’s visit in January.
Welcoming the panel’s report, Finance Minister Arun Jaitley expressed confidence that the insurance market would expand after the Bill is passed by Parliament. He also met co-chairs of the India-UK Financial Partnership — Jerry Gimstone, chairman, Standard Life, UK and Uday Kotak, executive vice-chairman and managing director, Kotak Mahindra Bank.