Being a member of the World Trade Organisation and General Agreement on Trade in Services, India will have to lift restrictions on foreign capital in insurance, sooner or later, says a paper prepared by consultancy firm Deloitte Touche Tomatsu India Pvt Ltd.
The member countries of GATS are not allowed to impose restrictions on the limit of foreign capital in the insurance sector.
With the opening up of insurance sector in the country, Insurance Regulatory and Development Authority of India had put a cap of 26 per cent on foreign equity, the paper notes.
With the provisions of WTO taking effect from 2005, the Indian insurance sector would be subject to stiff and intense competition.
The member countries are also not allowed to impose certain measures such as limitation on number of service suppliers, type of entity restriction and limit on persons employed.
The paper says that financial services providers are required to maintain prudential norms for protection of investors, depositors etc, to ensure stability of the system.