Cabinet clears bill to hike FDI in insurance sector to 100%

NEW DELHI: In a bid to expand insurance penetration in the country, the Union Cabinet on Friday approved a bill to raise foreign direct investment in the insurance sector to 100 per cent, according to sources.

The bill may be introduced in the ongoing Winter session of Parliament, which is slated to conclude on December 19.

According to a Lok Sabha bulletin, the Insurance Laws (Amendment) Bill 2025, which seeks to deepen penetration, accelerate growth and development of the insurance sector and enhance ease of doing business, is part of the 13 legislations listed for the ongoing session of Parliament.

The Insurance Laws (Amendment) Bill, 2025, may be introduced in Parliament on Monday, sources said.

Finance Minister Nirmala Sitharaman, in this year’s Budget speech, proposed to raise the foreign investment limit to 100 per cent from the existing 74 per cent in the insurance sector as part of new-generation financial sector reforms.

So far, the insurance sector has attracted Rs 82,000 crore through foreign direct investment (FDI). The finance ministry has proposed amending various provisions of the Insurance Act, 1938, including raising FDI in the insurance sector to 100 per cent, permitting the merger of a non-insurance company with an insurance company, and creating

The proposed amendment primarily focuses on promoting policyholders’ interests, enhancing their financial security, and facilitating the entry of additional players into the insurance market a dedicated policyholder fund. According to sources, the proposed bill also provides a provision for at least one among the top management, like the Chairman, Managing Director, or CEO, to be an Indian citizen as part of the guardrails.

The Cabinet has retained the net worth requirements for insurance companies, sources added.

As part of a comprehensive legislative exercise, the Life Insurance Corporation Act 1956 and the Insurance Regulatory and Development Authority Act 1999 will be amended, alongside the Insurance Act 1938.

The amendments to the LIC Act propose empowering its board to take operational decisions, such as branch expansion and recruitment.

The proposed amendment primarily focuses on promoting policyholders’ interests, enhancing their financial security, and facilitating the entry of additional players into the insurance market, thereby driving economic growth and employment generation.

Aditya Birla Sun Life Insurance MD-CEO Kamlesh Rao said the move may encourage more global players to explore India, translating that interest into meaningful scale will depend on how effectively new entrants can navigate this distribution landscape.