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RBI/2014-15/545
A. P. (DIR Series) Circular No. 94
April 08, 2015
To
All Authorised Dealer Category-I Banks
Madam / Sir,
Foreign Direct Investment (FDI) in India – Review of FDI policy –Sector Specific
conditions- Insurance sector
Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to
Annex B of Schedule 1 to the Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident outside India) Regulations, 2000 notified vide
Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to
time. In terms of Schedule 1 to the Notification ibid, 26% Foreign Direct
Investment (FDI) is permitted under Automatic route in Insurance sector subject
to conditions.
- The extant FDI policy for Insurance sector has since been reviewed and
further liberalized. Accordingly, with immediate effect, FDI in Insurance sector
shall be permitted up to 49% subject to the revised conditions specified in the
Press Note 3 (2015 Series) dated March 2, 2015. Also, a new activity viz. “Other
Insurance Intermediaries appointed under the provisions of Insurance Regulatory
and Development Authority Act, 1999 (41 of 1999)” has been included within the
definition of ‘Insurance’.
- Besides, the salient changes over the existing regime include:
- Foreign investment in Indian insurance company shall be limited up to forty-nine
percent of the paid up equity capital;
- Foreign direct investment up to 26 percent shall be under automatic route and
beyond 26 percent and up to 49 percent shall be with Government approval;
- Foreign investment in the sector is subject to compliance of the provisions of
the Insurance Act, 1938 and the condition that companies bringing in FDI shall
obtain necessary license from the Insurance Regulatory & Development Authority
of India for undertaking insurance activities.
- An Indian insurance company shall ensure that its ownership and control remains
at all times in the hands of resident Indian entities;
- Foreign portfolio investment in an Indian insurance company shall be governed by
the provisions of Foreign Exchange Management (Transfer or issue of security by
a person resident outside India) Regulations, 2000 and provisions of the
Securities Exchange Board of India (Foreign Portfolio Investors) Regulations.
- Any increase of foreign investment of an Indian insurance company shall be in
accordance with the pricing guidelines specified by Reserve Bank of India under
the Foreign Exchange Management Act, 1999.
- Terms 'Control', 'Equity Share Capital', 'Foreign Direct Investment' (FDI),
'Foreign Investors', 'Foreign Portfolio Investment', 'Indian Insurance Company',
'Indian Company', 'Indian Control of an Indian Insurance Company', 'Indian
Ownership', 'Non-resident Entity', 'Public Financial Institution', 'Resident
Indian Citizen', 'Total Foreign Investment' will have the same meaning as
provided in Notification No. G.S.R 115 (E), dated 19th February, 2015.
- A copy of Press Note 3 (2015 Series) dated March 2, 2015 issued in this
regard by DIPP, Ministry of Commerce & Industry, Government of India is
appended.
- Reserve Bank has since amended the Principal Regulations through the Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident outside
India) (Third Amendment) Regulations, 2015 notified vide
Notification No.
FEMA.340/2015-RB dated March 3, 2015, c.f. G.S.R. No. 183 (E) dated March 12,
2015
- AD Category – I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(B. P. Kanungo)
Principal Chief General Manager
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