May 11, 2012, 10.16 AM IST

FM defers Insurance Bill; unhappy with 26% FDI cap

Unsatisfied with the terms of the Insurance Bill, Finance Minister Pranab Mukherjee has deferred the consideration of the Bill.

Source: CNBC-TV18

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Unsatisfied with the terms of the Insurance Bill, Finance Minister Pranab Mukherjee has deferred the consideration of the Bill.

“A 26% FDI cap already exists, so it makes no sense going ahead with the same cap,” he said exclusively to CNBC-TV18 after the Cabinet meet. He further adds that to attract foreign capital, the cap has to be more than 26%.

The Bill cleared retained the 26% foreign direct investment cap in the sector, while the government was rooting for a hike to 49%.

Finance Ministry sources say that the need for more consultation was felt during the Cabinet discussion, due to which the Bill has been deferred. An effort will be made to evolve consensus on a higher FDI cap.

Mukehrjee says the Parliamentary Standing Committee’s recommendations will have to be considered again, but he assures that the Bill will be taken up soon.

Apart from the 26% FDI cap, the Bill allowed government owned general insurance companies to raise funds from the open market. Additionally, the Bill brought into existence standalone health insurance companies which were previously not present in India.