Govt issues notification for fast pacing 100% FDI in insurance

The finance ministry has issued a notification paving the way for quick implementation of 100% foreign investment in the insurance sector once it receives parliament approval.

As per the notification, the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025, seek to replace the existing limit of 74% foreign investment with “as stipulated by the Insurance Act, 1938”.

“In the principal rules, in rule 3, the words ‘to exceed 74% of the paid-up equity capital of such Indian insurance company’ shall be substituted with the words ‘to exceed the limit as stipulated by the Insurance Act, 1938’,” said the notification issued on August 29.

“The foreign investment proposals of the Indian insurance company shall be allowed on the automatic route for the paid-up equity capital as stipulated by the Insurance Act, 1938, subject to verification by the Insurance Regulatory and Development Authority of India,” the notification added.

In the February budget, the Centre announced that the FDI limit for the insurance sector will be raised from 74% to 100% and that the enhanced limit will be only allowed for companies who invest their entire premiums in India.

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The government had further noted that current guardrails and conditionalities associated with FDI will be reviewed and simplified. Besides easing foreign investment limits, the proposed Insurance Laws (Amendment) Bill also has provisions for composite licences and allowing foreigners as key managerial personnel (KMP) in Indian insurance firms.The government is yet to introduce the bill in the parliament. Last month, finance minister Nirmala Sitharaman had said in Lok Sabha that 100% FDI in insurance will help unlock the full potential of the Indian insurance sector and improve insurance coverage.

“With the increase in foreign direct investment limit from 74% to 100% for insurance companies, the government aims to unlock the full potential of the Indian insurance sector, which is projected to grow at 7.1% annually over the next five years, outpacing global and emerging market growth,” she said in a written reply in Lok Sabha.

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