Sunday, June 7, 2009

FDI in Insurance : increase in the limit

A day after the government announced its intent on allowing foreign direct investment (FDI) in insurance, the industry is upbeat. All companies with a foreign partner, whose shareholding is currently curbed at 26 per cent, have showed interest in increasing it to 49 per cent.

"We are contributing capital even today in the insurance companies," a senior AIG (American International Group) official said. In its home country, AIG is facing financial problems but said it will look at increasing stake in Tata-AIG Life and Tata-AIG General Insurance companies once the FDI norms are relaxed.

"AIG will consider increasing its stake subject to the agreement between both the partners. We will review the situation at that stage (when the insurance bill is passed)," he said. "Standard Life will be increasing stake to 49 per cent," said Paresh Parasnis, principal officer and executive director of HDFC Standard Life. "The first MoU that was signed between the promoters provided for that. Another agreement signed over a year-ago said that the valuation arrived would be at a fair value basis."

But he's not jumping the gun. "We will have to wait and see as to what the new provisions provide for. Will the foreign promoter be allowed to increase stake through FDI or through a combination of FDI and foreign institutional investment (FII)," he said.

"It does not depend on whether the foreign promoters are willing to increase their stake but whether they are capable of increasing their stake," said US Roy, CEO and MD, SBI. "The situation will differ from promoter to promoter. BNP Paribas has so far not indicated anything. It will be decided by the shareholders.""There is also a need to augment resources in the banking and insurance sectors in order to permit them to serve the needs of society better," President Prathibha Patil said on Thursday.

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