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INDIAN INSURANCE COMPANIES (FOREIGN INVESTMENT) RULES, 2015 – AN OVERVIEW |
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INDIAN INSURANCE COMPANIES (FOREIGN INVESTMENT) RULES, 2015 – AN OVERVIEW |
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In exercise of the powers conferred by Section 114 (2) (aaa) of the Insurance Act, 1938 read with Section 2(7A) (b) of the Insurance Act, 1938 and Section 24 of the Insurance Regulatory and Development Authority Act, 1999, the Central Government make rules in respect of foreign investment in Indian insurance companies namely ‘Indian Insurance Companies (Foreign Investment) Rules, 2015 (‘Rule’ for short). The said Rules came into effect from 19.02.2015. The Rules prescribes the quantum of foreign direct investment as detailed below:
The term ‘foreign investor’ is defined vide Rule 2(g) for the purpose of these rules as all eligible nonresident entities or persons resident outside India investing in the equity share of an Indian Insurance company, as permitted to do through the Foreign Direct Investment and Foreign Portfolio Investment windows under FEMA regulations, 2000 as described in these rules. The term ‘foreign portfolio investments’ is defined vide Rule 2(h) as including investments to the equity share of an Indian Insurance company by Foreign Institutional Investors, Foreign Portfolio Investors, Non Resident Indians, Qualified Foreign investors and other eligible portfolio investor entities of persons in accordance with provisions contained in Regulations 5 (2), (2A), (3) and (8) of FEMA Regulations, 2000. The term ‘total foreign investment in an Indian Insurance Company’ is defined vide Rule 2(p) as the sum total of direct and indirect foreign investment by the foreign investors in such company, calculated in accordance with the Insurance Regulatory and Development Authority (Registration of Companies) Regulations 2000, read with para 4.1.4. of the Consolidated FDI policy of the Government of India.
Where an entity like a bank, whose primary business is outside the insurance area,is allowed by the authority to function as an insurance intermediary, the foreign equity investment caps applicable in that section shall continue to apply, subject to the condition that the revenues of such entities from their primary business must remain above 50% of their total revenue in any financial year; Other aspects related to or associated with or flowing from matters related for foreign investments in an Indian Insurance Company, which are the subject matter of these rules and fall within the regulatory ambit of the authority, will be regulated as per regulations to be framed by the authority, consistent with the relevant statutes and other rules framed there under.
By: Mr. M. GOVINDARAJAN - March 28, 2015
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