Finance Minister Nirmala Sitharaman
The Ministry of Finance has proposed to delete provisions with regard to the condition of Indian residents who have the majority of directors and important management positions in insurance companies with foreign investments.
Design for changes in the rules of the Indian insurance companies (foreign investments), 2015, is considered a precursor to amend the law of 100 percent Direct Foreign Investments (DBI). However, a high government official said Businessline, “Once the design has been converted into definitive rules, it also applies to existing companies.”
The BDI of a maximum of 74 percent is permitted in the insurance sector by date. Finance Minister Nirmala Sitharaman, in her budget speech for FY26, presented 100 percent BDI for the sector. While the law is still expected for changing the limit, the official said that the draft for change in rules aims to revise the current guardrails and conditions, as announced by the minister.
New rules
A provision in the draft proposes to omit clause (a) and (b) along with explanation under sub-rule (1) of rule 4. In the original rule, the sub rules state, “In an Indian insurance company having foreign investment (a) a majority of its directors (b) a majority of its key management persons and (c) at least one Among the Chairperson of its board, its managing director and its chief executive officer, Shall Be Resident Indian Citizens. ” Statement says that the expression ‘Key Management Person’ has the same meaning as it assigned in guidelines of the authority in the field of corporate governance for insurers in India. The design only retains clause (C).
In addition, the design states that in the rules all references to currency management (transfer or issue of protection by a person lives outside India), 2000, are replaced by rules for society management (non-debt instrument), and all references to FEMA regulations, 2000, are replaced by FEMA (NDI) rules. The official said that this keeps in mind, all related sections will be removed. The provision with regard to 74 percent CAP will also be replaced by the words “to exceed the limit as determined by the Insurance Act, 1938”.
Space for more
Sonam Chandwani, managing partner at KS Legal & Associates, said: “Earlier the law was restrictive, prescribed and heavily in the field of enforcement of the regulations. Now it is again calibrated as permitted, based principle, and Regulator verified.
Manmeet Kaur, partner at Karanjawala & Co, said that the proposed changes will certainly reduce the overhead costs of the regulations and the investment process will streamline and at the same time streamline the penetration of the increase in insurance. The limit of 74 percent stock capital is proposed to be replaced by the ceiling boundaries provided for under the Insurance Act, 1938. “It is likely that there will be further changes that increase the limit to 100 percent, as proposed in the budget of 2025, that India will allow 100 percent FDI,” she said.
Arun Khatri, managing partner at K&R Legal, said by removing the explicit BDI cap from the rules and postponing according to the law, the government has eliminated the passion for conflicts, duplication or outdated provisions. This ensures a streamlined legal framework, where a single amendment to the old -law is sufficient. “Even if the surgical ceiling stays at 74 percent, the concept currently reflects a deliberate legislative technique for reducing flexibility, reducing the compliance with the compliance – ACT – parity in the insurance regulation of India,” he said.
Published August 31, 2025
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