RBI notifies the Foreign Exchange Management (Non-Debt Instruments) (Second Amendment) Rules, 2026 Relating to FDI in Insurance Sector

The Department for Promotion of Industry and Internal Trade (“DPIIT”), Ministry of Commerce & Industry, Government of India, had, vide Press Note No. 1 (2026 Series) dated February 9, 2026 (“Press Note 1”), notified the liberalization of FDI Policy relating to the insurance sector. Pursuant to Press Note 1, the sectoral cap for FDI in insurance companies had been increased to 100% (from 74%) under the automatic route. Subsequently, the Ministry of Finance has, vide gazette notification S.O. 2186(E) dated May 2, 2026, formally amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“NDI Rules”), to incorporate the changes introduced pursuant to Press Note 1 (the “FEMA Amendment”).

The key aspects under the FEMA Amendment include, inter alia, the following: 

• The aggregate holdings by way of total foreign investment in the equity shares of an Indian Insurance Company by foreign investors, including portfolio investors, is permitted up to one hundred per cent. of the paid- up equity capital of Indian Insurance company, subject to approval and verification of the Insurance Regulatory and Development Authority of India (“IRDAI”).

• In an Indian insurance company having foreign investment, at least one among the Chairperson of its Board, its Managing Director and its Chief Executive Officer, shall be resident Indian citizens.

Conclusion:
The FEMA Amendment gives effect to the Government’s decision to permit up to 100% foreign investment in Indian insurance companies under the automatic route, marking a significant liberalisation of India’s FDI regime for the insurance sector. While the amendment is expected to enhance capital inflows and facilitate greater foreign participation, investments remain subject to IRDAI approval and compliance with governance safeguards, including the requirement that at least one of the Chairperson, Managing Director, or Chief Executive Officer be a resident Indian citizen. The amendment is likely to strengthen the sector’s growth prospects while balancing increased foreign ownership with regulatory oversight.