Cabinet gives nod for up to 20% FDI in LIC under auto mode

The existing FDI policy has also been “simplified and enhanced” to provide clarity, one of them said.

The country’s biggest life insurer had filed for the sale of a 5% stake by the government on February 13. The IPO, expected to be the country’s biggest ever, is likely to be launched next month. The pricing of the issue is yet to be decided with some estimates pegging the offer size at about Rs 63,000 crore.

Certain changes and alignments under various provisions of the FDI policy have also been made to provide greater clarity through an updated, consistent and easily comprehensible framework for overseas investment in LIC. This was crucial as the existing policy doesn’t have any specific provision for overseas investment in LIC, which is a statutory corporation established under the LIC Act, 1956.

“Since, as per the present FDI policy, the foreign inflows ceiling for public sector banks is 20% under the government approval route, it has been decided to allow foreign investment of up to 20% for LIC and such other corporate bodies,” another person said.

Additionally, FDI in LIC and other such state-owned corporate entities has been kept in the automatic route, as in the case of the rest of the insurance sector, to expedite the capital-raising process by cutting down approval requirements. This means prior approval of the Reserve Bank of India or the central government is not required.