Private Insurance company can now enhance its
capital Up to 45.1%
without
insisting for indian investment
An ordinance on insurance has paved the way for a fresh dose of foreign investment
in the insurance. Through this ordinance
present limit of foreign investment in a private insurance
company has increased from 26 % to 49 %.
Now a private insurance company, where foreign investment is up to maximum limit of 26%,
can enhance its present capital
to the extent of 45.1% by additional foreign investment, without expecting any further contribution from Indian
investment.
Consider the following case.
If the total capital of private
company is Rs 100 crore, the maximum allowable foreign investment up till now is
Rs 26 crore, the rest of Indian investment is Rs 74 crore. The existing ratio of foreign investment to Indian
investment is 26% to 74%.
With the promulgation of
insurance ordinance, the above company, can now increase its capital by additional
contribution of Rs 45.1 crore from foreign investment. By this new capital will
be Rs 145.1 crore, ie increased by 45.1%
In the increased capital of Rs
145. 1 Crore,
The share of foreign investment is Rs 71.1 crore, (original
Rs 26 cr + additional Rs 45.1 Cr)
The share of Indian
investment is Rs 74.0 crore, (original Rs 74 cr + additional Rs nil )
The New ratio of foreign investment to total
investment is = 71.1 / 145.1 = 49 %
The New ratio of Indian investment to total investment is = 74 / 145.1 = 51 %
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Ramesh Itnal (Rtd ADM) – Dharwad