The Union Government on Saturday permitted up to 20 per cent foreign direct investment (FDI) under automatic route in IPO-bound LIC to facilitate disinvestment of the country's largest insurer.
The government has already approved listing of shares of LIC on the stock market through an IPO by part-sale of its stake and raising of fresh equity capital. Foreign investors may be desirous of participating in the mega IPO. However, the existing FDI policy does not contain any specific provision for foreign investment in LIC, which is a statutory corporation established under the LIC Act, 1956.
Since, as per the present FDI policy, the foreign inflow cap for PSU banks is 20 per cent under government approval route, it has been decided to allow foreign investment of up to 20 per cent in LIC and such other corporate bodies. Increased FDI inflows will supplement domestic capital, technology transfer, skill development for accelerated economic growth and development across sectors.
Further, in order to expedite the capital raising process, such FDI has been kept under the automatic route, as in the case of the rest of the insurance sector, one of the sources said.
Sources said other minor enhancements in the existing FDI policy have also been carried out in order to provide an updated, consistent and easily comprehensible FDI framework.
The FDI policy currently lists only 'Insurance Company' and 'Intermediaries or Insurance Intermediaries' under the insurance sector.
LIC being a statutory corporation, is not covered under either insurance company or intermediaries or insurance intermediaries and no limit was prescribed for foreign investment in LIC under the LIC Act, 1956; the Insurance Act, 1938; the Insurance Regulatory and Development Authority Act, 1999 or regulations made under the respective laws.
Further, with an intent to improve the overall FDI policy, certain changes and alignments under various provisions of the policy have been carried out.
"The reform in the FDI policy will have several benefits. It would facilitate foreign investment in LIC and such other corporate bodies, for which the government may have a requirement for disinvestment purposes.
