Applications for foreign direct investment in an insurance company promoted by a private bank would be cleared by the RBI and IRDAI to ensure that the 74% limit of overseas investment is not breached.
The changes took effect following amendments to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, as per the gazette notification issued by the Finance Ministry on August 19.
“These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021,” it said.
In March, Parliament passed a bill to raise the foreign direct investment (FDI) limit in the insurance sector from 49% to 74%. The Insurance Act, 1938 was last amended in 2015, raising the limit to 49%, resulting in foreign capital inflow of ₹26,000 crore over 5 years.
“Applications for foreign direct investment in private banks having joint venture or subsidiary in insurance may be addressed to the Reserve Bank for consideration in consultation with the Insurance Regulatory and Development Authority of India (IRDAI),” to ensure that the foreign investment limit is not breached, the notification said.