A Parliamentary Committee on Wednesday recommended a composite foreign investment cap of 49 per cent in the insurance sector and supported a government Bill to amend the Act.
At present, a limit of 26 per cent is allowed only through the FDI route. "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," said the report tabled in the Rajya Sabha.
The Rajya Sabha had in August appointed a 15-member Select committee to scrutinise the long pending Insurance Laws (Amendment) Bill, 2008. The Bill was held up for nearly six years on account of political differences.
The government is likely to bring the Bill for consideration of the Upper House as early as next week. The panel report, however, contains dissent notes from four members -- P Rajeev (CPI-M), Derek O'Brien (TMC), Ram Gopal Yadav (SP) and K C Tyagi (JDU).
The panel, headed by Rajya Sabha MP Chandan Mitra, has suggested inclusion of a person from the insurance industry in the Securities Appellate Tribunal as an expert.
It has recommended suitable amendment to the Securities and Exchange Board of India Act for the inclusion. The panel also recommended that penalties on insurance companies be linked to seriousness of offences committed by them. It has suggested mechanism to ensure that there is minimum scope for subjective interpretation.
The Standing Committee on Finance headed by senior BJP leader Yashwant Sinha in 2011 had rejected the proposal to hike FDI to 49 per cent in the insurance sector, saying it may not have the desired effect and could expose the economy to global vulnerability.
The Select Committee has unanimously agreed not to bring down the paid-up equity capital in the health insurance sector as compared to the life and general insurance.
The panel suggested that the capital requirements may be retained at the Rs 100-crore level to ensure health insurers have adequate capacity for providing critical services to citizens, and it also pitched for giving top priority to this segment.
"The insurance Bill be passed," the Committee said, adding the government may take more measures as recommended by it.
The committee suggested that the Law Ministry and the insurance regulator IRDA should modify the definition of the term "nominee" in order to remove any ambiguity. The Supreme Court had suggested that there was no need for two categories of nominees -- beneficiary nominee and collector nominee.
It also recommended that adequate protective mechanism be instituted to ensure agents get their commission and the commission structure be determined by IRDA on market conditions.
Illustration: Uttam Ghosh