Budget 2025: Finance Minister Nirmala Sitharaman has proposed to raise the foreign investment limit to 100 per cent in the insurance sector. While presenting Budget 2025-26 on Saturday, Sitharaman said the FDI limit for the insurance sector will be raised from 74 to 100 per cent. However, this will require amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999.
"This enhanced limit will be available for those companies which invest the entire premium in India.
The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," she said.
What does it mean?
The move is expected to attract more players and will eventually help achieve the target of 'Insurance for All' by 2047.
The entry of more players in the sector would not only push penetration but result in greater job creation across the country. Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India. These include companies like Agriculture Insurance Company of India Ltd and ECGC Ltd.
What do experts feel?
According to experts, the government's decision to increase the FDI limit in the insurance sector to 100% is a landmark reform that will significantly strengthen the industry by attracting fresh capital, global expertise, and cutting-edge innovation.
"This move will enhance financial inclusion and drive deeper insurance penetration across both urban and rural India. Additionally, it will provide insurers with greater financial flexibility to expand their reach, address the evolving needs of policyholders, and contribute to the country’s overall economic growth. Furthermore, the revamped Central KYC Registry is a welcome step toward strengthening data security and ensuring a seamless, trusted experience for customers. By prioritizing transparency and ease of doing business, the government is laying a strong foundation for a more resilient and digitally empowered financial ecosystem, said Jude Gomes, MD & CEO, Ageas Federal Life Insurance.
However, experts are also of the view that the move may bring regulatory complexities that need to be carefully addressed.
"Increased foreign investment will also require careful navigation of regulatory complexities, governance frameworks, and maintaining equilibrium between global and domestic players," said Amit Roy, partner and leader of insurance and allied businesses at PwC India.
How FDI limit has been raised over time
It was in 2015 when the Modi government hiked the foreign direct investment (FDI) cap in the insurance sector from 26 per cent to 49 per cent. Later in 2021, it was further raised to 74 per cent.
The government earlier allowed 100 per cent foreign direct investment in insurance intermediaries.