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This is an archive article published on April 23, 2000

Govt finally constitutes IRDA

NEW DELHI, APR 22: The government has constituted the much-delayed Insurance Regulatory Development Authority to hasten the opening up of ...

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NEW DELHI, APR 22: The government has constituted the much-delayed Insurance Regulatory Development Authority to hasten the opening up of the insurance sector to private domestic and foreign investors, official sources said today.

The Insurance Regulatory Development Authority Bill was passed by Parliament during the winter session last year and President’s assent came 14 days later. But its notification got unusually delayed as it could be done only along with the constitution of the IRDA on April 19. A formal announcement of its constitution will be made in Parliament early next week, the sources said.

With the notification of IRDA, rules and regulations for opening up the insurance sector was in place and first private insurance company with foreign participation was expected to be set up by October this year. IRDA will be a statutory regulatory body on the lines of Securities and Exchange Board of India and will act as a watchdog to oversee the operations of private insurance companies.

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It will also be the licensing authority for private domestic and foreign companies to operate in the country. Foreign investment upto 26 per cent will be allowed in the private domestic insurance companies. The domestic companies will have to bring down its equity to 26 per cent in ten years so as to ensure health competition in the sector.

Opening up of the Insurance sector is expected to bring in much needed funds for infrastructure development in the country. Within years of the opening up of the sector, about five to ten billion dollars of insurance and pension funds annually are expected to flow into the infrastructure sector which need an investment of over 15 billion dollars annually in the next 15 to 20 years.

Public sector Life Insurance Corporation and General Insurance Companies together has been so fare able to generate funds valued at Rs 22,000 crore which was insufficient to meet the fund requirement needed for infrastructure development in the country. With the constitution of IRDA, there would be no change in the status of public sector LIC and GIC which will continue to remain 100 per cent government owned companies.

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