Days Ahead Of LIC IPO, Modi Govt Approves FDI Up To 20%

A modification has been authorised to allow foreign direct investment (FDI) in the Life Insurance Corporation of India (LIC), with the existing policy substantially simplified, as part of the government's attempts to make India an attractive investment location. As per the official sources, FDI up to 20 per cent is now permitted in LIC through the automated approach.

Other modest changes have been made to the current FDI Policy to offer an upgraded, consistent, and simply understandable FDI framework. The FDI policy change will improve the nation's comfort of conducting business, resulting in more Inflow of FDI and, as a result, contributing to increased income, employment, and investment.

The administration has authorised the listing of LIC shares on the share market through an initial public offering (IPO), which would include selling a portion of the government's shareholding in the company and raising new equity capital. Foreign investors may be interested in investing in LIC's initial public offering. The current FDI policy, on the other hand, included no particular provisions for foreign investment in LIC, which is a legal corporation founded under the LIC Act of 1956. FDI in authorised sectors is authorized up to the limit mentioned against each industry or operation, according to applicable rules and regulations, according to the policy.

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According to paragraph 5.2.22 of the FDI Policy, insurance is an allowed sector. Nevertheless, underneath the Insurance sector, the FDI Policy presently only mentions Insurance Companies and Middlemen or Insurance Intermediaries. Because it is a statutory organisation, the LIC is not covered by either Insurance Companies or Insurance Intermediaries. Furthermore, under the LIC Act of 1956, the Insurance Act of 1938, the Development authority and Insurance Regulatory Act of 1999, or the rules enacted under the relevant Acts, there is no restriction on foreign investment in LIC.

Because current policy limits foreign participation in public sector banks to 20 per cent with administration clearance, it has been determined to enable foreign investment in LIC as well as other corporate entities up to 20 per cent.

Furthermore, such FDI has been maintained on the automatic path, as it is in the remaining portion of the insurance sector, to speed up the capital raising process.

To strengthen and improve the overall FDI Policy, some adjustments and alignments underneath certain aspects of the FDI Policy are also being implemented to give better clarity and a more up-to-date, consistent, and readily understandable FDI framework.

The FDI policy overhaul will offer several advantages. It would make it easier for foreign investors to invest in LIC and other corporations for whom the administration might have a disinvestment mandate. The change will make conducting business easier and lead to more FDI inflows while also ensuring compliance with the general intent/objective of FDI policy. Increased FDI inflows would help the execution of Atmanirbhar Bharat by supplementing local capital, skill development, and technology transfer for quicker economic development and growth across sectors.

The administration's FDI policy changes, investor facilitation, and ease of doing business initiatives have helped India attract historic FDI inflows in recent years. Inflows of foreign direct investment into India totalled $ 45.15 billion in 2014-2015, and have continued to rise since then.