CENTRE TO ALLOW 20% FDI IN LIC

CENTRE TO ALLOW 20% FDI IN LIC

Context:

According to the news published in CNBC on 12 January 2022, the Centre will soon amend the Foreign Exchange Management Act (FEMA) rules to allow for a 20% foreign direct investment (FDI) in the Life Insurance Corporation of India (LIC). This will be done prior to the public listing of the insurance policy.

Current Scenario:

• Currently, the government allows foreigners to choose stock shares from many Indian insurers, except the LIC.

Key Highlights:

• The FDI policy amendment process has been finalized by the Department of Financial Services and the Department of Investment and Public Asset Management (DIPAM) after consultation with the Department of Industry and Internal Trade (DPIIT).
• Current policy principles allow for foreign investment in companies and not in corporations. The changes will include allowing FDI to 'body corporates'.
• A business board is a business entity in which a business has a distinct legal entity separate from the entity that creates it.
• The Centre could include an appropriate explanation for the policy of allowing investment.

As the government approves foreign stakes, global funds could contribute to the insurance behemoth's initial public offering (IPO) and buy more after being listed on the exchange.