India's Finance Ministry raises insurance foreign ownership cap to 100%
→Foreign insurers above 74% must restructure under amended FEMA automatic-route rules
Change
Finance Ministry amended FEMA non-debt rules — raising the foreign direct investment (FDI) cap in insurance companies and intermediaries to 100% under the automatic route.
Why it matters
Full foreign ownership of insurance entities is now permitted — but only through the automatic route. Any structure routed outside the automatic route breaches the amended Foreign Exchange Management Act (FEMA) non-debt rules. Foreign ownership of Life Insurance Corporation (LIC) is capped separately at 20% — acquisitions above that threshold are non-compliant and must be unwound.
Implications
- → Foreign insurers holding between 74% and 100% of an Indian insurance entity must confirm the additional stake routes through the automatic route — structures outside the automatic route breach amended FEMA non-debt rules.
- → M&A and legal teams structuring inbound FDI in insurance companies and intermediaries must use the automatic route — both entity types are explicitly covered and government-route structures are non-compliant under the amended rules.
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Source
View on The Hindu