Govt Allows 100 Per Cent FDI In Insurance Sector, Caps LIC At 20 Per Cent, Separate Rule For Bank Intermediaries

The government of India notified 100 per cent foreign direct investment (FDI) in insurance companies in India, effective May 2, 2026. Through the gazette notification dated May 2, 2026, the government notified 100 per cent FDI investment through the automatic route. This 100 per cent of the total paid-up equity investment in an insurance company is, however, subject to approval by the Insurance Regulatory and Development Authority of India (Irdai).  

According to the notification, “Foreign investment in this sector shall be subject to compliance with the provisions of the Insurance Act, 1938(4 of 1938), and the condition that Companies receiving FDI shall obtain necessary licence or approval from the Insurance Regulatory and Development Authority of India for undertaking insurance and related activities.”

The changed provision will be applicable to insurance brokers, insurance consultants, corporate agents, reinsurance brokers, third-party administrators, managing general agents, surveyors and loss Assessors, insurance repositories, and other intermediaries, notified from time to time by the Irdai.

FDI Limit For Banks Working As An Insurance Intermediary

While 100 per cent FDI under the automatic route applies to the insurance intermediaries, the conditions are a bit different for banks, which are permitted by Irdai to work as insurance intermediaries.

Per the notification, “Where an entity like a bank, whose primary business is outside the insurance area, is allowed by the Insurance Regulatory and Development Authority of India to function as an insurance intermediary, the foreign equity investment caps applicable in that sector shall continue to apply, subject to the condition that the revenues of such entities from their primary (i.e., noninsurance related) business must remain above fifty per cent of their total revenues in any financial year.”

Life Insurance Corporation Of India (LIC) FDI Limit Under The Automatic Route

Notably, for Life Insurance Corporation of India (LIC), the FDI cap under the automatic route has been kept at 20 per cent. Its framework is different from that of other insurance companies.  

“Foreign investment in LIC shall be subject to compliance with the provisions of the Life Insurance Corporation Act, 1956 (31 of 1956), and such other provisions of the Insurance Act, 1938 (4 of 1938), as are applicable to LIC as per the provisions of section 43 of the Life Insurance Corporation Act, 1956 (31 of 1956),” the Gazette notifies.

In Budget 2025-26, Finance Minister Nirmala Sitharaman raised the issue of FDI in the insurance sector, and informed that the limit will be increased from 74 per cent to 100 per cent. According to the Union Finance Minister, 100 per cent FDI will pave the way for better insurance penetration as more companies will come to invest.

In December 2025, the Parliament passed the bill ‘Sabka Bima Sabki Raksha (amendment of insurance laws) Bill, 2025’ to allow 100 per cent FDI in insurance. The president approved the bill, and it became the law. Subsequently, in February 2026, the Department for Promotion of Industry and Internal Trade (DPIIT) under the Commerce and Industry Ministry issued a notification allowing 100 per cent FDI in the insurance sector in India.