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Insurance Bill cleared by Union Cabinet - Views on News from Equitymaster
 
 
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  • Oct 21, 1999

    Insurance Bill cleared by Union Cabinet

    According to newspaper reports, the Union Cabinet has approved the Insurance Regulatory and Development Authority (IRDA) Bill. The bill, which seeks to provide statutory status to the IRDA and permit private sector participation, will be tabled in the current session of Parliament.

    The highlights of the IRDA Bill are:

    • Statutory status to the insurance regulator
    • Privatise the insurance sector by amending the exclusive privileges granted to the state owned insurance companies
    • The minimum capital stipulated for life and non life insurance companies has been set at Rs 1 bn and Rs 2 bn respectively
    • The Indian partner will have to mandatorily lower its stake in the private insurance firm from 74% to 26% in 10 years.
    • The foreign equity component is to be capped at 26%.

    The privatisation of the Indian insurance sector would catalyse the process of economic development. This is mainly due to the fact that infrastructure projects usually require loans having long maturities. These types of loans would become readily available once the insurance sector takes off. Moreover, the privatisation of the sector would definitely send positive signals to potential investors regarding the seriousness of the effort to effect reforms in India. This would help in attracting more funds in to the country.

    As competition heats up, the insurance sector by itself would become more vibrant and customer focussed. This would go a long way in weeding out the inefficiencies in the sector and also in improving productivity in the sector.

    The privatisation of the insurance sector is in the best interests of the country. Its successful passage and implementation will definitely be a major milestone in India's efforts to reform its economic policies.

     

     

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