New Delhi: In the 2025-26 Budget, the Centre increased the cap on foreign direct investment (FDI) in the Indian insurance sector to 100 percent, but only a few companies could fully utlise the earlier cap of 74 percent set in the 2021-22 budget, finance ministry data till December 2024 has shown.
Union Finance Minister Nirmala Sitharaman shared the data on the equity share capital held by foreign entities in life and general insurance sector by private insurance companies as of December 2024 in the Parliament, in a written response Monday to a question by R. Sachithanantham, a Communist Party of India (Marxist) Lok Sabha MP from Tamil Nadu.
The reply further stated, “Section 2(7A) (b) of Insurance Act, 1938, prescribes the upper limit of FDI in an insurance company. The decision to increase FDI component in a particular insurance company is made by its promoters, depending upon various factors such as capital requirement of the company, solvency requirement, future business plans etc.”
Only four of 19 companies in the life insurance sector had achieved the 74 threshold of foreign direct investment as of December 2024, according to the data. This finding suggests a lukewarm response by foreign companies to an earlier FDI hike, which had increased the threshold in the insurance sector from 49 percent in 2021-22 to 74 percent.
Ageas Federal Life Insurance Company Limited, Aviva Life Insurance Co. Ltd., Credit Access Life Insurance Ltd., and Future Generali Life Insurance Co. Ltd. are the only four life insurance companies that managed to achieve the 74 percent limit of FDI. Foreign companies hold a 74 percent stake in these four life insurance companies.
Further, there are only eight companies out of 19 that have foreign investment stake between 30 percent to 49 percent in life insurance domain. The rest seven companies have FDI stake of less than 30 percent.
The finance ministry data further revealed that among the general and health private insurance companies, no companies had achieved the 74 percent threshold of FDI as of December 2024.
Zurich Insurance Company Limited’s 70 percent stake in Kotak Mahindra General Insurance Co. Ltd. makes Kotak Mahindra the only company to reach close to the earlier limit of FDI in the general and health private insurance categories. The next closest is Future Generali India Insurance Co. Ltd at 50.5 percent.
Out of 20 companies within general and health insurance category mentioned in the finance ministry reply, only nine have received foreign direct investment between 30 percent to 49 percent.
According to projections, the insurance sector would grow at an average rate of 7.1 percent, the Centre has stated, adding that it hiked the FDI limit to 100 percent to unlock the sector’s full potential.
In her written response, Sitharaman said, “Removing the FDI cap will attract stable and sustained foreign investment, increase competition, facilitate technology transfer, and improve insurance penetration in the country.”
After the FDI cap was raised to 74 percent, the lukewarm response of foreign companies four years down the line, however, paints a different picture, that India’s insurance sector has some issues that need fixing.
(Edited by Madhurita Goswami)