A Planning Commission panel has suggested allowing foreign investors to own a larger share in domestic insurance companies. The group, chaired by Planning Commission member Anwarul Hoda, has also said that foreign direct investment restrictions on reinsurance companies should be removed.
Present regulations allow a 26 per cent FDI in insurance and reinsurance companies. There has been a demand from insurance companies to raise the limit to 49 per cent.
"In order to ensure efficient utilisation of capital on a system-wide basis, general insurance companies may be permitted to take on risks originated by other players. As recommended for other insurance companies, FDI restrictions on reinsurance companies be removed," it said.
Holding that the insurance sector in India is in a high-growth phase with substantial investment requirements, the group said, 'permitting foreign investors to own a larger share may be considered'.
For the banking sector, the group recommended a gradual reduction in the statutory liquidity ratio from the current level of 25 per cent in line with other markets.
"Similarly, the cash reserve ratio, which has been increased several times recently as a monetary measure, may be aligned over time with an appropriate globally benchmarked level," the group added. At present, the central bank has
pegged CRR at 7.5 per cent.
The group also asked the government to reduce its stake in the public sector banks to 33 per cent,