Chennai, July 19 (IANS): The central government's proposal to approve foreign direct investment (FDI) in the insurance sector through the Foreign Investment Promotion Board (FIPB) is seen as clipping the sectoral regulator's wings and also a face saving measure by the BJP, say insurance officials.
"The composite cap in the insurance sector is proposed to be increased up to 49 percent from the current level of 26 percent with full Indian management and control through the FIPB route," union Finance Minister Arun Jaitley had said while presenting his maiden budget.
A former senior official of the Insurance Regulatory and Development Authority (IRDA) who did not want to be named told IANS that one of the earliest decisions by the central government was that the FIPB would not concern itself with the insurance sector.
Investment in this area will be the sole prerogative of the IRDA. He asked if the change indicated that the IRDA has lost its credibility.
Another former IRDA official, K. K. Srinivasan, told IANS that "On the face of it the central government proposal to route insurance FDI through FIPB clips the powers of the IRDA. On the other hand, the FIPB may seek IRDA's views and go by it."
A senior official of a private life insurer told IANS that the powers of the IRDA have been reduced but wondered why the regulator is remaining silent.
Industry officials recall how the IRDA protected its turf successfully some years ago against the Securities and Exchange Board of India when the latter proposed that life insurers get their unit linked insurance policies approved by it.
There is also a view that the FIPB's approval and full Indian management and control are a face saving device by the Bharatiya Janata Party (BJP) that had earlier opposed increasing the FDI limit from 26 to 49 percent.
Industry officials are of the view that the BJP might deflect the opposition attacks on its change of stance by saying that the FDI inflow will be monitored effectively.