FDI in insurance may bring Rs 30,000 crore in next five years.

MUMBAI: Foreign joint venture partners in Indian insurance companies are likely to bring in as much as Rs 30,000 crore in the next five years if foreign direct investment ( FDI) limit in the business is raised to 49 per cent from the current 26 per cent.

Indian promoters have already invested Rs 21,000 crore in the past decade, while foreign investors have pumped in Rs 7,000 crore in the past 12 years.

Big life insurance companies like SBI Life, ICICI Prudential and Bajaj Allianz have started to pay dividend to shareholders.

"But expecting them to further invest Rs 61,200 crore will be a challenge," according to an official of Irda, the insurance regulator.

Irda said that if the cap is raised to 49 per cent, the differential shares may be adjusted by exchange of shares between the domestic and foreign investors. "They would be governed by RBI rules and Fema guidelines, which determine the pricing of how domestic shares can be transferred to a foreign investor," said the official.

Bank-promoted companies will find it difficult to invest capital with the introduction of Basel-II requirements. There are 13 bank-promoted insurance companies in the life and general insurance space. Banks will need to provide extra capital for their core banking activities. Also, they can invest only up to 20 per cent of its net worth in an insurance company, and most banks are reaching this limit.

"It will allow easier flow of capital and improve our ability to expand," said Deepak Garg, MD and CEO of Future Generali Life Insurance.

Source : timesofindia.indiatimes.com