Cabinet approves up to 20 pc FDI in IPO-bound LIC

"An amendment has been approved to permit FDI in LIC. Now, FDI up to 20 per cent under the automatic route would be allowed in LIC," the official source said. The move would allow global investors to participate in the LIC's mega initial public offering (IPO).

The existing FDI policy did not prescribe any specific provision for foreign investment in LIC which is a statutory corporation established under LIC Act, 1956.

FDI upto 74 percent is, however, allowed in private insurance companies.

The FDI rule for LIC is now at par with public sector banks.

"Other minor enhancements in the existing FDI policy have also been approved in order to make FDI framework more comprehensible, consistent and updated. It will further enhance Ease of Doing Business in the country and higher FDI inflows," the official said.

LIC's mammoth IPO is expected to hit the market next month with upto 31.6 crore shares on offer.

The government plans to raise about Rs 65,000 crore by selling its shares in the insurance behemoth. LIC had filed draft red herring prospectus (DRHP) on February 13 with market regulator SEBI for the proposed IPO.

While the stock markets around the world recently saw volatility in the wake of Russian military action in Ukraine, the government has indicated that it will go ahead with LIC IPO.

"I can see in market, now that DRHP (of LIC) is out ... there is a buzz in the market. There is a lot of interest in the market. I am glad that the way in which it has been crafted in that shareholders also have a role to play. I think the way it has been crafted it has created a lot of interest.

We will be going ahead with it, "Finance Minister Nirmala Sitharaman had told reporters earlier this week in a media briefing. The Cabinet nod permitting FDI in LIC suggests government remains committed to reforms. The move is set to facilitate foreign investment in LIC and such other bodies corporate for which government may have a requirement for disinvestment purposes.

"The reform will facilitate ease of doing business and lead to greater FDI inflows and at the same time ensure alignment with the overall intent of FDI policy. Increased FDI inflows will supplement domestic capital, technology transfer, skill development for accelerated economic growth and development across sectors, to support the implementation of Atmanirbhar Bharat," said the government source.