FDI limit in insurance sector increased to 74%

A key take away from the Union Budget 2021 is that the Centre has proposed to increase FDI cap in insurance sector to 74%. Presenting the Budget, Finance Minister Nirmala Sitharaman, announced that the government will amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74%.

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Under the proposed new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50% of Directors being Independent Directors, and specified percentage of profits being retained as general reserve.

An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose off the assets to Alternate Investment Funds.

In order to consolidate the financial capacity of Public Sectors Banks, the Government has proposed further recapitalization of Rs. 20,000 crore during the fiscal 2021-22.

In order to help depositors of banks that are currently under stress, the Government will move an amendment to the DICGC Act, 1961 in the current Parliament Session.

For NBFCs with minimum asset size of Rs. 100 crores, the minimum loan size eligible for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is proposed to be reduced from the existing level of Rs. 50 lakhs to Rs. 20 lakhs, the Minister added.