MoF Amends FEMA Rules, Allows 100% FDI in Insurance sector

Current Context: On May 2, 2026, the Ministry of Finance (MoF) notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026, allowing 100% FDI in the insurance sector via automatic route.

• This reform follows the Sabka Bima Sabki Raksha Bill, 2025, which paved the way for liberalization.
• Earlier, foreign investment was capped at 74%, but now insurers and intermediaries can be fully foreign-owned
• The LIC exception remains, with foreign investment capped at 20% under the LIC Act, 1956.
• Safeguards include resident leadership requirements and IRDAI oversight to protect solvency and policyholders.
• The move is expected to boost capital inflows, innovation, and insurance penetration in India’s underinsured market.

Question:

Q.1 The Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026 allow how much Foreign Direct Investment (FDI) in the insurance sector?
a) 49%
b) 74%
c) 51%
d) 100%

Answer: d) The reform allows 100% FDI in insurance companies—a major liberalization step.