New Delhi: Making a strong case for raising FDI cap in insurance sector, Finance Minister P Chidambaram Monday said the industry requires USD 5-6 billion capital in the immediate run.
"Every company already has 26 percent FDI. So if you raise the cap from 26 percent to 49 percent, then there is a headroom for them to bring in more capital. The estimated capital requirement in insurance sector is about USD 5-6 billion in the immediate future," the Minister told reporters.
The penetration ratio in life insurance sector is 4.4 percent and 0.76 percent in the non-life segment, meaning a vast majority of the population does not have insurance at all.
While the Cabinet last week approved an amendment to the Insurance Laws (Amendment) Bill, 2008, to raise the foreign direct investment (FDI) in the sector from 26 percent to 49 percent, the proposal needs to be cleared by Parliament.
Chidambaram said the government intends to meet BJP and other parties ahead of the Winter Session to seek their support to raise the FDI cap to 49 percent from the present 26 percent as the sector require huge amount of capital.
He said "by and large" the provisions of the insurance bill are along the lines recommended by the Standing Committee for Finance and he does not expect any opposition to the entire bill or the most of its clauses.
"The disagreement is only...To only one clause (related with FDI ceiling).
"On that clause, I expect a vigorous debate and I hope I will be able to convince the opposition parties. Even before the Parliament session, I intend to meet with the Principal Opposition party and other parties and ask for their support," the Finance Minister said.
The Standing Committee headed by senior BJP leader Yashwant Sinha had recommended to maintain the FDI ceiling at 26 percent in the sector.
Increasing the FDI ceiling is a long standing demand of the industry and the sectoral regulator IRDA.