The Government of Indian is reportedly considering a proposal to raise the foreign direct investment (FDI) in the insurance sector to 49% from current 26%, as part of its plan to attract global underwriting firms in the country.
A senior finance ministry official was quoted by The Economics Times as saying that the permission would come with some riders including imposing limit voting rights for foreign investors.
The restriction will make sure that the control of the critical sector, involving lifetime’s savings of a large number of masses, does not pass into foreign hands, according to the news agency.
"The concern is that a foreign partner may get a big controlling stake even at 49%, if the Indian promoter decides to dilute its stake in favour of other Indian investors," the official told the publication.
To discuss over the issue, the finance ministry officials held a meeting with the representatives of the insurance sector, including the Insurance Regulatory and Development Authority (IRDA).
Following consultation with all the concerned stakeholders, the ministry will now submit a list of possible options to Indian Finance Minister Arun Jaitley, for further consideration and necessary action.
"The basic idea is that insurance companies should remain under Indian control. Within this framework we are looking at all possible options," the official said, adding that the staggered increase could be implemented in conjunction with the capping of voting rights.