If the United Progressive Alliance ( UPA) government wants more foreign investment in the insurance sector, it might have to ensure, with an explicit clause in the insurance Bill, that 23 per cent of the equity brought in is from foreign institutional investors ( FIIs), non- resident Indians and foreign corporate entities. That’s one of the conditions the Bharatiya Janata Party ( BJP) has put before the government for supporting in Parliament the insurance Bill, which envisages raising the cap on foreign direct investment ( FDI) in the insurance sector to 49 per cent. Former finance minister, Yashwant Sinha, opened this window during his conversation with Finance Minister PChidambaram on Saturday. This is not a new proposal and is BJP’s way of ensuring that one foreign company does not get to dominate the Indian insurance sector. Sinha argued that foreign direct investments and those by foreign institutional investors should be treated separately in the Insurance Bill — because no single foreign investor should get a 49 per cent stake in an insurance company, reducing two or more Indian entities to a minority as they shared the remaining 51 per cent. According to Sebi norms, no single FII can hold over 10 per cent equity in a firm and a sub- account of an FII cannot own more than a five per cent stake. Also, FII money is considered volatile in an industry that needs stable long- term funds. “The debate internally ( in the BJP) is whether allowing FDI in a sector where only ₹ 787,900 crore has flowed in, despite liberalisation, is worth the foreign control that could creep in,” said a top BJP leader. Turn to Page 16 > Says 23% of foreign investments should be by FIIs
Posted on: Tue, 06 Aug 2013 04:58:15 +0000
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