The Centre is set to amend the Foreign Exchange Management Act (FEMA) rules to allow 20 percent foreign direct investment (FDI) in Life Insurance Corporation of India (LIC) ahead of the public listing of the insurance behemoth, Business Standard reported, quoting unnamed officials.

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At present, the government allows foreigners to pick equity stakes in most Indian insurers, except LIC, which is a special entity created by an act of Parliament, a Bloomberg report said.

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According to the official, the plan to amend the FDI policy has been finalised by the Department of Financial Services and the Department of Investment and Public Asset Management (DIPAM) after consulting the Department for Promotion of Industry and Internal Trade (DPIIT).

The current policy terms allow foreign investment in companies and not in corporations. “The changes will include allowing FDI in ‘body corporates’,” Business Standard quoted the official as saying. A body corporate is a business structure in which the entity has a distinct legal identity separate from the body forming it.

The Centre may include a suitable definition in the policy to allow investments especially in LIC, the official said.

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With the government giving clearance to foreign stakes, global funds can participate in the upcoming mega initial public offering (IPO) of the insurance behemoth and also buy more after the exchange listing, Bloomberg said.

On January 9, Industry Secretary Anurag Jain said DPIIT will soon approach the cabinet for its approval to the changes in the FDI policy.

"Now it is a matter of drafting it out. We will try that soon we will make the cabinet note, after holding inter-ministerial consultation, (to) take the approval... It will be very soon," The Economic Times quoted Jain as saying.

LIC’s IPO is set to be the country’s biggest-ever public listing. The government plans to dilute a 10 percent stake in the insurance giant from the 100 percent it holds at present, media reports said earlier. The public issue is expected to value LIC at around $110 billion.

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The insurance giant is likely to file its draft prospectus with the market regulator for the IPO in January, as per reports by The Times of India. The government plans to float the public issue by the end of the ongoing fiscal.

(Edited by : Shoma Bhattacharjee)

First Published:Jan 11, 2022 5:19 PM IST