Cabinet allows 49% FDI in Insurance & Pension sector

[nrj]

Big-bang reforms continue: Cabinet allows 49% FDI in insurance, 26% in pension sector​

NEW DELHI: Signaling the government's intent to continue with reforms to boost economic growth and investor sentiment, the Cabinet on Thursday cleared all amendments to the insurance bill. In a major move the cabinet approved allowing 49% Foreign Direct Investment (FDI) in insurance.

The cabinet also cleared the Pensions Bill and allowed FDI in Pension Funds. Upto 26% FDI in the pension sector will now be permissible. The proposed changes to both the bills will now have to be cleared by both houses of the Parliament before they can come into effect.

Commenting on the development, Bharti-AXA Insurance expressed hope that the changes to the insurance bill will be approved in the winter-session of the Parliament. Deepak Sood of Future Generali was of the opinion that post the announcement, all foreign insurers would want to hike their stake in he joint venture.

However, Bibek Debroy of Centre for Policy Research told ET Now that he was not sure whether these bills would be passed in Parliament.

Hitting out at the government, Saugata Roy of TMC said that most political parties will find it difficult to support these measures.

Till now, 26 per cent foreign direct investment was allowed in the insurance sector while the pensions business was closed to foreign investment. The government had attempted to push the nine-year-old Pension Fund Regulatory and Development Authority Bill, which seeks to give statutory status to the pension regulator, in June as well, but put it on hold due to the impending presidential elections.

The decision on these bills had been deferred because of opposition from Mamata Banerjee's Trinamool Congress, which has since quit UPA after the government refused to roll back some of last month's decisions, notably the diesel price increase and FDI in multi-brand retail.

The government is believed to be building on the momentum generated by last month's reforms burst and buttress a growing view that the policy paralysis, which defined much of Congress-led UPA's second term in office, is ending.

The government wants to build on the positive sentiment created by its reforms burst while sending out a clear message that it is doing all it can to arrest the deceleration in growth that has been forecast by a stream of forecasters. On Wednesday, the Asian Development Bank cut its growth estimate for this year to 5.6 per cent from 7 per cent earlier.

On Wednesday, the government won crucial support for its proposed plan from the insurance regulator, which said a higher FDI limit in the sector was needed urgently.

"Unless we go for 49 per cent, we will not have the kind of capital required to underpin the growth of insurance industry," Insurance Regulatory and Development Authority ( Irda) Chairman J Hari Narayana said on the sidelines of a CII event in Delhi.

Big-bang reforms continue: Cabinet allows 49% FDI in insurance, 26% in pension sector - The Economic Times

 

[nrj]

re: Cabinet allows 49% FDI in Insurance, & Pension sector

Manmohan unveils second round of reforms

Carrying forward the reforms agenda ahead, the Government okayed the FDI in insurance sector, clears FCRA Bill and gives nod to FDI in pension sector

Unmindful of the strong opposition from various quarters, including the Parliamentary Standing Committee on Finance, which had opposed any hike in foreign direct investment (FDI) limit in the insurance sector, the Union Cabinet, under the leadership of Prime Minister Manmohan Singh, on Thursday, approved to hike the FDI ceiling in the insurance sector to 49 per cent from the present 26 per cent.

"The benefit of this amendment will go to private sector insurance companies, which require huge amount of capital and that capital will be facilitated with the increase in FDI to 49 per cent,'' Finance Minister P. Chidambaram told reporters at a briefing after the Cabinet meeting.

Mr. Chidambaram made it clear that state-run insurance companies would remain in the public sector domain.

With the Cabinet approving the proposal, the Insurance Laws (Amendment) Bill is likely to be taken up by Parliament for passage in the forthcoming Winter Session. The Parliamentary Standing Committee on Finance, headed by senior BJP leader Yashwant Sinha, had opposed any hike in the FDI limit in the insurance sector through a unanimous decision in May, asserting it would not be in the interest of the Indian economy. The Bill was introduced in Rajya Sabha in December, 2008.

The panel had agreed with the need to bring in comprehensive changes in the archaic laws governing the insurance sector. The insurance sector was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999, (IRDA Act, 1999).

This Act permitted foreign shareholding in insurance companies to the extent of 26 per cent with an aim to provide better insurance coverage and to augment the flow of long-term resources for financing infrastructure. The industry has been demanding for long to increase the FDI limit.

Cabinet approves 12th Five Year Plan

The Union Cabinet also approved the 12th Five Year Plan (2012-17) document aimed at achieving annual average economic growth rate of 8.2 per cent, down from 9 per cent envisaged earlier in view of the slowdown in the global economic and poor economic growth and recovery.

Talking to reporters after the Cabinet meeting, Finance Minister, P. Chidambaram said the Union Cabinet at its meeting headed by Prime Minister, Manmohan Singh discussed and approved the draft 12th Plan document. The document has already been approved by the full Planning Commission headed by Prime Minister Manmohan Singh on September 15.

The approved plan document will now be placed before the National Development Council (NDC), the apex decision making body, for the final approval. The NDC, headed by the Prime Minister with all Chief Ministers and Cabinet Ministers on board, is the final authority to grant approval to the Five Year policy document. In view of the ongoing global problems, the average annual growth target for the 12th Plan has been scaled down to 8.2 per cent from 9 per cent envisaged in the Approach Paper to the 12th Plan.

During the 11th Plan (2007-12), India has recorded an average economic growth rate of 7.9 per cent. This, however, is lower than the 9 per cent targeted in 11th Plan. Besides other things, the 12th Plan seeks to achieve 4 per cent agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10 per cent. The total plan size has been estimated at Rs. 47.7 lakh crore, 135 per cent more that for the 11th Plan (2007-12).

As regards to poverty alleviation, the Planning Commission aims to bring down the poverty ratio by 10 per cent. At present, 30 per cent of the population is below poverty line.

PTI adds

Cabinet clears FCRA Bill

Giving a reform boost to commodity markets, the government also approved the FCRA Bill that seeks to provide more powers to sectoral regulator Forward Markets Commission (FMC) and allow a new category of products.

"The Cabinet has approved the Forward Contract Regulation Act (Amendment) Bill. It will give more teeth to FMC. Farmers will also benefit," Food Minister K.V. Thomas told PTI.

The Forward Contract Regulation Act (FCRA) Bill, considered vital for the development of futures trade, aims to provide financial autonomy to the regulator.

FMC can become self-sufficient by collecting revenues in form of fees from exchanges after the passage of this Bill in Parliament, Mr. Thomas said.

The retirement age of FMC Chairman and its members will go up to 65 years from 60 years, if Parliament passes the Bill. The number of members in FMC has also been proposed to increase from four to nine.

The Bill also seeks to facilitate entry of institutional investors and pave the way for introduction of new category of products, like Options.

The Bill seeks to increase penalty on defaulters to Rs 50 lakh from the existing Rs 25 lakh.

At present, the country has five national and 16 regional commodity exchanges. Recently, FMC had given its approval to the Universal Commodity Exchange to operate as a national bourse.

The cumulative turnover of the commodity exchanges is about Rs 80.30 lakh crore till September 15 of the current fiscal.

Cabinet nod for FDI in pension sector

The government gave green signal to foreign investment in pension funds and said the FDI limit could go up 49 per cent in line with cap in the insurance sector.

Allowing FDI forms a part of the amendments to Pension Fund Regulatory and Development Authority (PFRDA) Bill, which was approved by the Union Cabinet.

"The FDI limit in pension will follow FDI limit in insurance. If insurance bill passes with 49 per cent, pension will also be 49 per cent," Finance Minister P Chidambaram told reporters.

The PFRDA Bill was introduced in the Lok Sabha in March 2011, following which the Standing Committee on Finance gave its recommendations in September last year.

Chidambaram said the government has accepted five key recommendations of the standing committee.

The Bill, which would allow part investment of the corpus in stock markets, is likely to be taken up for discussion and passage in the upcoming session of Parliament.

The original Bill had no provisions pertaining to FDI.

However, the Standing Committee on Finance, headed by senior BJP leader Yashwant Sinha, had suggested FDI in pension programmes but with a cap of 26 per cent.

The Bill had failed to get parliamentary approval in the previous term of UPA 1 government due to strong opposition from its then allies, the Left parties.

In June 2012, the Cabinet had deferred a decision on the Bill following opposition from the Trinamool Congress.

The Bill provides powers to the PFRDA to oversee multiple pension funds in the country and also paves way for being a full-time regulator for the sector.

It also provides for establishment of a statutory authority to undertake promotional, developmental and regulatory functions in respect to pension funds.

The Hindu : News / National : Manmohan unveils second round of reforms

 

[nrj]

re: Cabinet allows 49% FDI in Insurance, & Pension sector

BJP wants conditions for FDI in insurance, pension

In the wake of reforms announced by the government in insurance and pension sectors, BJP on Thursday said while it is not opposed to more FDI in these areas certain caveats and conditions should be met to "safeguard the interest of the people".

However, BJP remained ambivalent on whether it will support these measures in Parliament, saying it would first like to see the "fine print" of the reforms.

On the issue of FDI in insurance sector, BJP spokesperson Prakash Javadekar said the Parliamentary Standing Committee on Finance headed by Yashwant Sinha had gone into the issue and recommended 26% FDI.

"Sinha was the first one to propose 45% FDI in insurance ten years ago. That time Congress had opposed it and since we wanted to bring a consensus, we agreed to 26%. There are 16 members from UPA in the Standing Committee on Finance and unanimously they have said it should be 26%," Javadekar said.

He alleged the government has behaved in an "uncertain manner" on this issue.

Clarifying BJP's stand on the issue, Javadekar said "we are not opposed to FDI in insurance and pensions as we created it. Our concern is that many foreign companies have already invested more than 26% through debenture-type investments. Now, that will be converted into equity so no new FDI will come in."

BJP's other concern is that these companies have not penetrated the rural market as they were expected to and why IPO has not been allowed.

On pension, BJP maintained the government ensures "sovereign guarantee of the pension fund for minimum returns of 8.5%", protection of labour interest and security of the pension fund itself.

BJP wants conditions for FDI in insurance, pension - India - DNA

 

[Phenom]

re: Cabinet allows 49% FDI in Insurance, & Pension sector

I think the pension is also 49% not 26%

Overall good move, although there is doubts about the merits of the move, it will no doubt bring in more foreign capital. And importantly it would reinforce the belief that the reforms announced earlier were not a flash in the pan and more reforms are likely. Let's hope the BJP backs this.

 

[nrj]

re: Cabinet allows 49% FDI in Insurance, & Pension sector

I think the pension is also 49% not 26%

They shouldn't face difficulty in making it 49% for pension sector too.

"The FDI limit in pension will follow FDI limit in insurance. If insurance bill passes with 49 per cent, pension will also be 49 per cent," Finance Minister P Chidambaram told reporters.

 

[nrj]

re: Cabinet allows 49% FDI in Insurance, & Pension sector

India steps up reforms, this time in insurance, pension

Economic reforms in India received a further push Thursday, with the cabinet approving legislative changes that will allow up to 49 percent foreign equity in pension sector and hike such limit in insurance to 49 percent from 26 percent.

India's insurance industry is valued at $41 billion with 24 companies in life insurance business and 27 in general insurance industry. The penetration is rather poor at 4.4 percent of the population for life and 0.71 for non-life business.

In pension, the regulator has appointed seven fund managers to seek investments under the new pension scheme. Official data shows that a mere 12 percent of India's working population has some form of a retirement benefit.

The decisions on these two sectors is expected to go a long way in helping the domestic companies shore up their capital base, and also introduce new products and schemes that suit individual needs.

"The new instalment of big bang reforms is a clear message the government is determined to strengthen the economy," said R.V. Kanoria, president of the Federation of Indian Chambers of Commerce and Industry (Ficci), reflecting India Inc's mood.

"It has been a long pending step in the right direction to boost confidence of global insurers and investors. The insurance industry has been struggling on capital that will be now be forthcoming," added Shashwat Sharma, Partner with global consultancy KPMG.

The announcements follow a set of major reform measures last month like allowing up to 51 percent foreign equity in multi-brand retailing and up to 49 percent stake to global airlines in domestic aviation, while bringing parity in broadcast and telecom sectors.

India steps up reforms, this time in insurance, pension (Roundup) - NY Daily News | NewsCred SmartWire

 

[nrj]

re: Cabinet allows 49% FDI in Insurance, & Pension sector

All parties favour Bill; await clarity on FDI hike: PFRDA

Yogesh Agarwal, chairperson, PFRDA, in his reaction to the Cabinet nod on the increase of FDI in the pension sector, explains that the Bill has found support among a majority of parties in the Opposition, including the BJP and the ruling coalition. Agarwal adds that if the Bill was passed it would give the PFRDA statutory powers to put errant pension-fund manages in line.

Below is an edited transcript of the reaction on CNBC-TV18.

Q: What is your reaction to the Cabinet finally allowing the increase in FDI in the insurance and pension sectors?

A: As far as the pension sector is concerned, I think there has not been any increase in the amount of FDI because even at present, the pension fund managers were allowed to have an FDI upto 26 percent. I think Cabinet's announcement was made with a view to get the Bill passed in Parliament.

Q: The Cabinet note clearly proposes a similar FDI cap for the insurance and pension sectors...

A: If that is so, then why are you saying that an FDI of only 26 percent is allowed in the pension sector?

Q: The increase in FDI cap will actually be increased to 49 percent...

A: We will have to wait for clarity on whether the increase will be by 26 or 49 percent. But that does not takes away the fact that the announcement has been made with the aim to get the PFRDA Bill legislated.

Q: If the Bill is passed, it will give you statutory status. What will that mean for the PFRDA?

A: It will mean that the PFRDA will acquire the statutory powers to put errant pension fund managers in line without the need to stand in a court of law. So that will accord the PFRDA a lot of powers in terms of regulating the pension fund managers.

Q: You have obviously heard the comments that have come in from political parties that have been opposing this move saying that this is actually going to harm people, not benefit them, how do you take on that criticism. How do you respond to these arguments?

A: That's not what I hear. The Opposition, led by the BJP, has agreed to support the PFRDA Bill. I think a majority of the parties in the Opposition and the ruling coalition is in agreement over the PFRDA Bill which is in the interest of the country as well the pensioners. So, I don't think there is any problem on that front.

Q: How soon do you believe you will actually be able to improve the pension sector?

A: I wouldn't like to hazard a guess on that because I think we should leave it to the Cabinet to push the Bill in Parliament.

Q: For the lay person, what does this mean for pensioners and the common man?

A: For the first time in India history of the non-government sector, an individual has the chance to subscribe to a genuine pension plan as oppose to some imitations which have been floating around for quite a sometime.

Q: What will be next course of events?

A: The Bill which will go to Parliament will contain all the features required to address all concerns. I think as far as passing of the Bill is concerned, it is best left to the Cabinet to see it through in Parliament and I don't think we should worry too much on that.

Q: What will be the impact if the Bill is legislated at the winter session of Parliament?

A: The pension sector will gets a boost, the PFRDA will be doubly strengthened and will give a further impetus to extend the pension concept the people who have availed it.

All parties favour Bill; await clarity on FDI hike: PFRDA - CNBC-TV18

 

[sesha_maruthi27]

FDI, the new evil for INDIAN PEOPLE AFTER EAST INDIA COMPANY..........

 

[nrj]

Found this on PM's Facebook wall

 

[Bangalorean]

FDI, the new evil for INDIAN PEOPLE AFTER EAST INDIA COMPANY..........

The only evil is the left-leaning quasi-socialist mentality that has destroyed Indian economy, and hence the Indian nation, for decades.

Please, stop selling this snake oil. The country has had enough.

 

[sukhish]

The only evil is the left-leaning quasi-socialist mentality that has destroyed Indian economy, and hence the Indian nation, for decades.

Please, stop selling this snake oil. The country has had enough.

every party is pro poor except congress now. left TMC, AIADMK ecerybody is just for poor. they want to make sure that India remains
poor for anytime to come.

 

[Yusuf]

Expect the employees of state run insurance to go on strike protesting FDI.

Good move. We need capital. We need better insurance policies especially medical insurance which is just about useless for many people with hundreds of limitation clauses.

 

[thakur_ritesh]

If I am not mistaken the 2 FDI proposals should get a nod in the parl if SP and BSP are both on board, please confirm. Numbers should work out in favour of the government irrespective to BJP's support or not.

Anyway, long long time in coming, but it's never too late.

 

[Phenom]

Expect the employees of state run insurance to go on strike protesting FDI.

Good move. We need capital. We need better insurance policies especially medical insurance which is just about useless for many people with hundreds of limitation clauses.

The move doesn't affect govt insurance companies, this only affects the pvt players. Despite opening the sector to private companies insurance in India is still dominated by LIC, iirc they hold around 3/4th market share.

 

[marshal panda]

FDI is being increased in many sectors but not defense production,which will really make India self sufficient.

 

[Phenom]

Well the defence sector is not suffering because of lack of funds, their problems are different and extra foreign fund can't fix those, unless the plan is to completely privatise DRDO and other agencies.

 

[nrj]

If I am not mistaken the 2 FDI proposals should get a nod in the parl if SP and BSP are both on board, please confirm. Numbers should work out in favour of the government irrespective to BJP's support or not.

Anyway, long long time in coming, but it's never too late.

Govt will find it difficult to pass the bill in Rajyasabha. BJP's support will be crucial.

Sent via Tapatalk from a galaxy far far away

 

[arya]

the next they will sell the land


haa haa they they will see ourself

 

[Bangalorean]

the next they will sell the land


haa haa they they will see ourself

What is your point?

God help us! It is alarming to see the number of commies who are cropping up. God save the nation if this mentality continues.

 

[Ray]

Why are political parties against this?