After a long debate that spanned for years, the government has finally given its approval for the introduction of the Insurance (Amendment) Bill, 2008. At the same time, however, the government has also conceded that the bill may not be passed by the present Lok Sabha owing to lack of time.

The Finance Minister, P. Chidambaram, told news reporters on Friday that the decision of the approval of the bill was taken on the basis of the recommendation of a Group of Ministers (GoM) constituted to study the issue.

The bill proposes to increase the upper cap of foreign direct investment (FDI) from the current 26 per cent to 49 per cent. Chidambaram said that the bill "is being tabled. This is one short bill that raises equity from Rs 5 crore to Rs 100 crore."

The insurance industry has welcomed the move by the Union Cabinet. Increasing FDI would facilitate the insurance sector to further expand, launch innovative distribution channels, upgrade technology, enhance the current product portfolio and bring in global best practices.

Expressing his opinion, T. R. Ramachandran, Designate - MD & CEO, Aviva India, said in a statement: "We are delighted that the increase in FDI to 49 per cent has been approved by the Cabinet and we look forward to the Bill being approved soon. Calculation shows that raising the FDI limit may increase the total FDI in the life insurance industry by almost 2.5 times from the current levels of approximately Rs 2,500 crore."