The long-pending Insurance bill, a key economic reform legislation providing for raising foreign investment cap to 49 per cent, was today passed by Lok Sabha with the government insisting that the measure is crucial for expanding the penetration of insurance in the country.
The controversial Insurance Laws (Amendment) Bill, which seeks to replace an ordinance, also provides for imprisonment of up to 10 years for selling policies without registration with the regulator IRDA.
The proposed legislation will also allow PSU general insurers to raise funds from the capital market and provides for increased penalty to deter multilevel marketing of insurance products.
The bill, one of the key reform legislations, has been pending since 2008.
Justifying the decision to raise the cap from 26 per cent, Minister of State for Finance Jayant Sinha said the country needs this as "our insurance penetration is low".
Responding to concerns expressed by members about the fate of the poor, he said the measure takes care of the interests of even the poor "...we brought important safeguards that will protect full interest of people (insured)," he said.
For the poor, the minister said the government is bringing many different policies.
He said more and more FDI is required in the sector to provide more coverage to people of India.
Responding to questions posed by members, the Minister noted that in the banking sector, the FDI cap was 74 per cent and wondered why it cannot be increased in insurance sector.
Sinha cited the case of China and a number of other countries, saying they allow higher foreign investment in insurance. "We are well within our global benchmarks," he said.
His reply was marked by a spat after he made certain comments which were strongly objected to by Opposition members.
The matter settled only after he expressed an apology and said he had not intention to "disrespect anyone" but was "just pointing out factual errors".
(With agency inputs)