NEW DELHI: With government allowing foreign direct investment (FDI) in insurance sector to 49 per cent, HSBC Insurance Holdings Limited plans to increase its stake in the Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited from the current 26 per cent in the country. The company has send its proposal to Oriental Bank of Commerce and Canara Bank to buy out their stake in the tripartite life insurance company. “HSBC has send their proposal showing their interest in increasing their stake. The matter is in discussion. Our board will take a call on it,” a senior official of OBC said requesting anonymity. The life insurance company formed in 2008 is a joint venture between Canara Bank, which presently holds 51 per cent stake, HSBC Insurance Ltd that holds 26 per cent and Oriental Bank of Commerce holding 23 per cent stake. In order to bring foreign inflows, the government is gradually relaxing norms for FDI across all sectors. This will help the government to spur investment in the country and boost infrastructure spending. The government has also removed separate caps for FDI and foreign portfolio investments (FPI) by replacing them with single upper limit in a bid to make foreign investments easier to bring uniformity in FDI structure. As per the FDI norms, “An Indian insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian entities.” “Any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by Reserve Bank under the Foreign Exchange Management Act, 1999,” the Commerce Ministry said in its note. More than 90 per cent of FDI received in the country comes under automatic route. As against $1.19 billion received under the approval route in 2013-14 fiscal;, during the financial year 2014-15 recorded FDI inflow of $2.22 billion with a growth of 87 per cent.
HSBC Insurance Holdings is in talks with Canara and the Oriental Bank of Commerce (OBC) over increasing its stake from 26% in their joint venture, following the Indian government allowing foreign investment in insurance to rise to 49% in the country. Canara HSBC Oriental Bank of Commerce Life Insurance Company was formed by the three firms in 2008, with Canara holding 51%, HSBC 26% and OBC 23% stakes in venture.