THEBUSINESSBYTES
BUREAU
NEW DELHI, MAY
2, 2026
In a landmark reform aimed at
deepening capital inflows and accelerating insurance penetration, the Finance
Ministry on Saturday formally notified 100 per cent foreign direct investment
(FDI) in the insurance sector under the automatic route, ushering in a new era
for India's rapidly expanding financial services landscape.
Under the Foreign Exchange Management
(Non-Debt Instruments) (Second Amendment) Rules, 2026, foreign investors can
now own up to 100 per cent equity in insurance companies and intermediaries,
including brokers, without requiring prior government approval. However, the
foreign investment cap for the Life Insurance Corporation (LIC) will remain at
20 per cent.
The notification gives statutory
effect to the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025,
which was passed by Parliament in December last year and subsequently received
Presidential assent. The legislation had raised the FDI ceiling in the
insurance sector from 74 per cent to 100 per cent, marking one of the most
significant liberalisation measures in the sector's history.
The Department for Promotion of Industry
and Internal Trade (DPIIT) had already notified the revised FDI policy in
February 2026. With the Finance Ministry's latest notification, the regulatory
framework is now fully aligned, clearing the path for global insurers to expand
their footprint in India.
The move is expected to attract
substantial foreign capital, foster greater competition, drive innovation, and
support the government's broader objective of enhancing insurance access across
the country. Industry experts believe the reform will strengthen the sector's
financial resilience while helping India move closer to universal insurance
coverage.
