The Cabinet approved the insurance amendment bill with a composite foreign investment cap of 49 per cent for presenting it in Parliament, incorporating the changes suggested by a House panel.
The Cabinet, headed by Prime Minister Narendra Modi, approved incorporation of amendments suggested by a Parliamentary select panel in the Insurance Laws (Amendment) Bill, 2008, sources said.
The Rajya Sabha is likely to take up the Bill for consideration and passage next week.
Earlier on Thursday, the Select Committee in its report to the Rajya Sabha had suggested hike in composite foreign investment limit in insurance sector to 49 per cent which would include Foreign Direct Investment (FDI) as well as portfolio investment.
At present only 26 per cent FDI is allowed in private sector insurance companies. The hike in foreign investment limit is estimated to attract about Rs 25,000 crore (Rs 250 billion) of overseas funds in the sector.
"The Committee recommends that the composite cap of 49 per cent should be inclusive of all forms of foreign direct investment and foreign portfolio investments," the report said.
The Congress support for the Insurance Laws (Amendment) Bill, 2008, is crucial as the ruling NDA does not have majority in the Upper House.
The bill, which has been pending since 2008, may not have a smooth ride in the Rajya Sabha with certain political parties opposing further opening of the insurance sector to foreign investment.
"The Bill is aimed at removing archaic and redundant provisions in the relevant legislations and to enable the insurance sector to work for the betterment of the insured with greater efficacy," an official release said later.
