On February 1, 2021, the Finance Minister of India presented the Union Budget for the Financial Year 2021-22 (‘Budget’), as part of which an increase in the foreign investment limit for Indian insurance companies was proposed, from 49% to 74%, and it was indicated that foreign control may be permitted subject to certain safeguards, including: (i) majority of directors and key management personnel of the insurance company to be resident Indians; (ii) at least 50% of the directors on the board of the insurance company to be independent directors; and (iii) specified percentage of profits to be retained as general reserves.

To give effect to the abovementioned increase, amendments have been carried out to the Insurance Act, 1938 (‘Insurance Act’) pursuant to the Insurance (Amendment) Act, 2021, which came into effect on April 1, 2021, by virtue of which, increase in foreign investment limits in an Indian insurance company from 49% to 74% has been permitted. However, the conditionalities for this and the manner of such increase are yet to be finalised by relevant regulatory authorities, including the Government of India and the Insurance Regulatory and Development Authority. Amendments will need to be carried out to: (i) the rules, regulations, guidelines and circulars prescribed under the Insurance Act; and (ii) the existing Indian foreign exchange laws, including the Foreign Exchange Management (Non-Debt Instrument) Rules, 2019 and the Consolidated FDI Policy Circular of 2020, to operationalize this increase.