The Indian Cabinet has approved increasing the foreign direct investment (FDI) in the insurance sector to 49% from the current level of 26%, meeting long pending demand of the industry to open up the sector to spur growth.
Sources with knowledge of the matter said: "The Cabinet Committee on Economic Affairs (CCEA) has approved raising of FDI cap in the insurance sector to 49% from 26%."
The development follows after Finance Minister Arun Jaitely indicated in his maiden budget speech that FDI in insurance sector will be increased to give a new lease of life to the investment starved sector.
However, the Cabinet through the Foreign Investment Promotion Board (FIPB) ensured that management control will remain in the hands of Indian promoters.
The proposal to raise FDI cap has been pending since 2008 when the previous government came up with Insurance Laws (Amendment) Bill to increase foreign holding in insurance joint ventures (JVs) to 49%.
The move is expected to enable insurance companies to get much needed capital from overseas partners.