Financial Daily from THE HINDU group of publications
Tuesday, Nov 29, 2005
Financial Daily from THE HINDU group of publications Tuesday, Nov 29, 2005 |
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Money & Banking
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Foreign Direct Investment Hike in insurance FDI cap: Changes in Act under study Our Bureau
Mr Ashok Jha, Secretary, Economic Affairs, Ministry of Finance, and Sir David Wright, Vice- Chairman, Barclays Capital, UK, at the India Economic Summit 2005 in the Capital on Monday. - - Kamal Narang
New Delhi , Nov. 28 THE Government is pushing ahead with the proposal to hike the foreign direct investment (FDI) cap in the insurance sector from 26 per cent to 49 per cent. Addressing the India Economic Summit organised by the CII, Mr Ashok Jha, Secretary, Department of Economic Affairs, said that legislative amendments to increase the cap were under consideration. ``As far as a hike in FDI (in insurance sector) is concerned, an announcement has already been made. The legislation is under consideration,'' Mr Jha said. Unlike other sectors, a legislative amendment would be required to permit higher level of FDI in insurance as the cap has been imposed through the IRDA Act itself. However, the Government has adopted a cautious approach in implementing its proposal as the Left parties have been repeatedly expressing their opposition to any such moves. On the other hand, there has been intense pressure from foreign insurers and other powerful quarters to hike the cap to 49 per cent as had been indicated earlier. Speaking on pension reforms, Mr Jha said that he expected the Pension Fund Regulatory and Development Authority (PFRDA) Bill to be taken up for passage in Parliament shortly. Mr Jha also carried forward the debate over consolidation in the banking sector by stating that there was "tremendous" need for mergers to create larger entities that would be able to absorb risks better. ``There is tremendous need for consolidation among both public and private sector banks. Besides providing them economies of scale, they (the merged entities) would be in a better position to absorb risks,'' the DEA secretary said. Mr Jha reiterated that the Government would have no role in pushing through mergers of public sector banks and that the decision would be left to the board of directors of individual banks. Mr Jha admitted that the bank credit to GDP ratio in India was much lower when compared to other ASEAN nations. ``Sustained growth in GDP mandates a significant increase in bank credit, especially to small and medium enterprises and agriculture sectors, '' he said. He said that the government was committed to doubling credit to agriculture in three years while ensuring a 20 per cent growth in credit to SMEs.
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