Centre Relaxes FDI Norms, Allows 100% Foreign Investment In Insurance

(MENAFN- KNN India) New Delhi, May 4 (KNN) The Centre has notified two major changes to foreign direct investment (FDI) rules, easing norms for certain overseas investors with exposure to neighbouring countries and allowing up to 100 percent FDI in the insurance sector.

Under the revised rules, effective May 1, foreign companies with up to 10 percent shareholding from entities in countries sharing land borders with India, including China and Hong Kong, can invest through the automatic route in sectors where such investment is permitted.

Earlier, any level of ownership from these countries required prior government approval under the norms introduced in 2020, reported PTI.

New Ownership Threshold and Exemptions

The relaxation, approved by the Union Cabinet in March, applies only to companies without 'significant beneficial ownership' from neighbouring countries.

In line with provisions under the Prevention of Money Laundering Act (PMLA), significant beneficial ownership has been defined as more than 10 percent ownership of shares, capital, or profits.

However, the revised norms will not apply to entities registered in China, Hong Kong, or other countries sharing land borders with India, including Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan.

The notification also clarified that multilateral institutions such as the Asian Development Bank (ADB), New Development Bank (NDB), and Asian Infrastructure Investment Bank (AIIB), where India is a member, will not be treated as entities of any specific country for investment purposes.

Additionally, the government said transfer of participating interests or rights in oil fields by Indian companies to foreign entities will now be treated as foreign investment.

100% FDI Allowed in Insurance Sector

In a separate notification, the Finance Ministry allowed up to 100 percent FDI in insurance companies and intermediaries, including brokers, third-party administrators, and corporate agents under the automatic route. However, foreign investment in Life Insurance Corporation of India (LIC) has been capped at 20 percent.

The rules also mandate that either the chairman or the managing director and chief executive officer of insurance entities must be resident Indian citizens.

The move is aimed at boosting foreign investment inflows amid currency pressures and addressing concerns raised by global investors, particularly private equity firms.

(KNN Bureau)

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