December 2012

The Union Government on 4 October 2012 approved the Companies Bill, 2011 and Pension Fund Regulatory and Development Authority (PFRDA) Bill, moving with its proposal to hike the foreign investment in the insurance sector to 49 percent from the present 26 percent with also opening up the pension sector for FDI. The decision was taken by Union Cabinet headed by Prime Minister Manmohan Singh. The benefit of this amendment will go to the private sector insurance companies which require huge amount of capital and that capital will be facilitated with increase in FDI to 49 per cent. With this, the state-run insurance companies will remain in the public sector. The government also 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. Also with opening up the pension sector, PFRDA bill gives statutory powers to the interim regulator, constituted through an executive order in 2003. However, it is not easy for the union government to pass this legislation in the parliament because the Opposition Bhartiya Janta Party (BJP) opposed the hike in FDI limit in insurance and insisted for the bill to be brought again in Parliament Standing Committee.

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