New Delhi: After the fiasco on retail FDI, the UPA government is facing failure in another key reform it has long contemplated - hiking FDI cap in insurance from 26 per cent now to 49 per cent to give Indian insurance firms an avenue to raise much-needed growth capital.
The Parliamentary Standing Committee has rejected the government's proposal to raise FDI in the Insurance sector. The government is likely to accept its recommendations which went on to say that given the present global scenario a hike in FDI would not benefit Indian companies.
Apart from various aspects of the insurance bill, the Standing Committee on Finance also asked the government to bring an integrated modern banking law for India, instead of bringing piecemeal amendments.
The Committee, which adopted its report on Insurance Laws (Amendment) Bill, 2008, said keeping in mind the present global scenario, any hike in foreign equity would not be in the interest of Indian companies.
It also recalled that Parliament was assured that the present cap of 26 per cent will not be breached in future.
The Committee also recommended that the present statement of objectives of the Bill should be redrafted as it gives a "misleading" impression that the issue of foreign participation in Indian insurance companies was decided upon the recommendations of an expert committee, which is not a fact.
It also said that in health insurance business, a company with with a minimum Rs 100 crore capital should only be allowed to set up shop and hence the present requirement of Rs 50 crore should be accordingly increased.
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