India update – Foreign Direct Investment in LIC

The Department for Promotion of Industry and Internal Trade (“DPIIT”) has issued a Press Note dated 14 March 2022 (“Press Note”), to amend certain provisions of the Consolidated Foreign Direct Investment Policy, 2020 (“Policy”).

One of the key changes introduced by the Press Note is that foreign investors are now permitted to invest in LIC, which is India’s biggest life insurance company, up to 20% (“twenty percent”) of its paid-up share capital without any approvals from Government of India.

The objective behind introducing foreign investment in the state owned LIC is that the initial public offer (“IPO”) of LIC is likely to be launched soon, wherein the Government of India is seeking to dilute its ownership. The Press Note was required, as currently under the Policy, foreign direct investment (“FDI”) in Indian insurance company is permitted up to 74% (“seventy-four percent”) of its share capital. However, FDI is not allowed in LIC which is a statutory corporation established under the Life Insurance Corporation Act, 1956 (“LIC Act”). Apart from the above, the Press Note also stipulates the following (key) conditions for FDI in LIC:

1.     Foreign investment in LIC shall be subject to compliance with the applicable provisions of the LIC Act and Insurance Act, 1938; and

2.     If there is an increase in foreign investment in an Indian insurance company, then it shall be in accordance with the pricing guidelines specified by the Reserve Bank of India under the respective Foreign Exchange Management (FEMA) Regulations.

We trust you will find this update an interesting read. Please click here to access the Press Note.