Rajya Sabha passes bill to raise FDI in insurance

New Delhi: Rajya Sabha on Thursday approved a bill to raise the foreign investment limit in the insurance sector to 74 per cent with Finance Minister Nirmala Sitharaman saying while control will go to foreign companies, the majority of directors and key management persons will be resident Indians who will be covered by law of the land.

"The laws of the land are fairly mature. They can control every operation which happens in this country. No one can take money away and make us sit and watch," she said replying to a debate on the bill. Giving out reasons for the decision to raise the foreign direct investment (FDI) limit, she said insurance companies are facing liquidity pressure and the higher limit would help meet the growing capital requirement.

On change of definition of 'control' of the insurance company with the hike in FDI limit, she said control means right to appoint a majority of directors, control the management of policy decisions including by virtue of their shareholding or management right or shareholder agreements or voting agreements. By raising the FDI limit to 74 per cent, the current provision of control being vested with Indian companies had to be dropped. But conditions have been attached to the control.

"Majority of directors in the board and key management persons to be resident Indians which means every law of the land will be applicable on them. And a specific percentage of the profits is to be retained as general reserves. It cannot be (taken away)," she said.