New Delhi: The government today deferred a decision on hiking Foreign Direct Investment (FDI) cap in insurance sector to 49% from 26%, as it watches for the impact of the global financial crisis.
“The issue of liberalising the insurance sector was to come up before the Cabinet but was deferred,” Minister for Science and Technology Kapil Sibal said after the Cabinet meeting.
“We have deferred the decision as the Finance Minister is away,” Sibal said without elaborating further.
A group of ministers headed by External Affairs Minister Pranab Mukherjee had cleared the proposal last month for revising the FDI cap in insurance sector.
However, the global financial crisis has deepened since then. American International Group (AIG) and Fortis are among the major financial institutions which required bailouts in the last few week due to financial ill-health.
AIG is minority partner in two separate joint ventures for life and non-life insurance with the Tatas while the Fortis has partnership with state-run IDBI Bank.
The proposed changes include amendments in the IRDA Act, 1999 and LIC Act, 1956 among others.
The UPA regime had proposed raising the FDI ceiling in its first budget in 2004-05. However, opposition from the Left parties forced the government to refer it to GoM in 2006 end.
Following opening of the insurance sector in 2000, about three dozen private companies have started operations in the country. Many of them are constrained by the 26% FDI and have been making a case for raising the foreign investment cap.