Authors: Nakul Batra (Partner), Palak Sehgal (Associate Partner) and Devbrat Singh (Principal Associate)
The Ministry of Finance (Department of Economic Affairs), on May 2, 2026, notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026 (“Rules”), amending Schedule I of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The Rules, which came into force upon publication in the Official Gazette, formalise the revised foreign direct investment (“FDI”) regime for the insurance sector.
Set out below are the key highlights of the Rules:
100% FDI in Insurance Companies: Foreign investment up to 100% of the paid-up equity capital of an Indian insurance company is permitted under the automatic route, subject to approval and verification by the Insurance Regulatory and Development Authority of India (“IRDAI”) and compliance with the Insurance Act, 1938. Entities receiving FDI are required to obtain the requisite licence or approval from IRDAI.
100% FDI in Insurance Intermediaries: Insurance intermediaries, including insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors, managing general agents, insurance repositories and such other entities as may be notified by IRDAI, are also permitted to receive up to 100% FDI under the automatic route, subject to applicable conditions.
LIC Carve-Out: Foreign investment in the Life Insurance Corporation of India continues to be capped at 20% under the automatic route, subject to compliance with the Life Insurance Corporation Act, 1956 and applicable provisions of the Insurance Act, 1938.
Governance Requirements: In Indian insurance companies with foreign investment, at least one of the Chairperson of the Board, Managing Director or Chief Executive Officer must be a resident Indian citizen. In the case of insurance intermediaries with majority foreign shareholding, a similar requirement applies to one of the Chairperson, Chief Executive Officer, Principal Officer or Managing Director.
Bank-Linked Intermediaries: Where an entity (such as a bank), whose primary business lies outside the insurance sector, is also permitted by IRDAI to act as an insurance intermediary under the Rules, subject to the condition that revenue from its non-insurance business remains more than 50% of its total revenue in any financial year. The Rules clarify that the FDI caps applicable to such entities’ primary business sector will continue to apply.
Alignment with Revised FDI Policy: Pursuant to the passage of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 by Parliament in December 2025 (increasing the FDI cap from 74% to 100%), and the subsequent notification by the Department for Promotion of Industry and Internal Trade in February 2026, the present amendment simply aligns the FEMA framework with the revised FDI policy in relation to the insurance sector.
The amendment is expected to facilitate increased foreign participation, capital inflow and operational expansion in India’s insurance ecosystem.
A copy of the Rules is enclosed herewith for ease of reference.
We hope this is useful for all our readers.
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Disclaimer: This update is general in nature and is not intended to be a substitute for specific legal advice. Please contact the author(s) for specific legal advice in this regard.
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