The Government seems to be in no hurry to hike the foreign direct investment (FDI) cap in the insurance sector.
Indications are that Parliament is unlikely to take up amendments to the Insurance Act in the ongoing session that is slated to end on August 7.
When asked if the Insurance Law Amendment Bill would come up in the Lok Sabha this session, Mr Namo Narain Meena, Minister of State for Finance, remained non-committal.
He also parried questions from presspersons as to whether the Bill to facilitate LIC to hike its capital will be taken up by the Lok Sabha in the current session. Currently, FDI in insurance companies is capped at 26 per cent.
Vast potential
Earlier, speaking at an Assocham summit on the Indian Insurance Industry 2009, Mr Meena urged private insurance companies to find ways and means to explore the rural sector.
He pointed out that the growth of the insurance sector would crucially depend on the extent to which the vast potential in the rural sector is tapped by the companies.
The Insurance Regulatory and Development Authority (IRDA) Chairman, Mr J. Hari Narayan, told presspersons that the mergers and acquisitions guidelines for the sector are likely to be finalised in the next two months.
“It is most likely to be finalised in the next couple of months,” he said.
Currently, there are no specific M&A guidelines in the insurance sector in the country.
The new norms would encourage consolidation in the insurance sector.
There are currently 22 life insurance firms and 21 non-life insurance companies operating in the country. Asked about Reliance Life’s proposal to float an IPO, Mr Hari Narayan said: “They had come to the regulator to seek permission and we have found that we are not empowered to accord any such thing before 10 years.”
According to the provisions of the Insurance Act, if a company is not in existence for 10 years and wishes to launch an IPO, then the only authority which has powers to do so is the Government and subsequently the company has approached the Government in the matter, he said.
Source: The Hindu Businessline