| Govt to set health rider for 49% FDI in insurance |
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New Delhi, 5 June The Bharatiya Janata Party- led government is set to raise the foreign direct investment ( FDI) threshold in insurance to 49 per cent with two riders. All companies will have to provide health insurance, and voting rights of foreigners will be limited to 26 per cent, the current investment cap. The government is working on a three- pronged strategy to make health care affordable. First, ensuring availability of products by making it mandatory for all companies to provide standalone health insurance. Second, it will encourage people to go for health insurance by offering tax sops in the Budget. The exemption limit for self, spouse and dependent children might be raised from ₹ 15,000 a year. The limits for additional deduction of ₹ 15,000 ( if parents are dependent) and ₹ 20,000 ( if the individual or one of the parents is asenior citizen), could also go up. Third, the finance ministry will work out a mechanism in consultation with the health ministry to ensure patients are not overcharged by private hospitals. "While allowing up to 49 per cent FDI, we will ask companies to compulsorily offer health insurance. They are willing to do that. Second, we are contemplating higher tax exemption on health insurance. More products and players should be in the market. Third, there should be some regulation of charges levied by private hospitals," said a ministry official, asking not to be named. The decision to include mandatory health cover in the FDI policy for insurance was taken after Finance Minister Arun Jaitley asked the department of financial services to give it a push because of the rising cost of private health care. Jaitley also wanted control of insurance companies to remain in Indian hands. Accordingly, the 26 per cent cap on voting rights could be imposed. The policy will keep the capital requirement for health insurers at ₹ 50 crore, against ₹ 100 crore for others. Also, as the government wants to open the sector gradually, it might first allow higher foreign investment in health and general insurance. Turn to Page 23 > REFORM WITH CAUTION |CAP: FDI in insurance may be raised to 49% from 26% |RIDERS: Those wanting to raise FDI beyond 26% will have to offer health insurance; cap on voting rights of foreign firms' nominees on boards capped at 26% |CAPITAL: Minimum paid- up capital for health insurance is ₹ 50 crore, unlike ₹ 100 crore for other insurance segments |PIECEMEAL WAY: Govt might follow agradual approach to raising insurance FDI — starting with non- life, health and then life |PRIORITY: Health insurance a priority for govt; tax sops might follow in the Budget |REGULATION: Govt to bring mechanism to ensure private hospitals don't overcharge patients |HOPES: FDI inflows of ₹ 5,000- 6,000 cr expected immediately after insurance FDI cap is raised Finance ministry considers tax sops, regulation of hospitals to make health care affordable |
| SME funding to get ₹ 5,000- cr boost |
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Mumbai, 5 June The government, with the help of the capital market regulator, is planning to set up a first of its kind co- investment fund to fund small and medium enterprises ( SMEs), considered the backbone of the Indian economy. According to sources, the fund will have an initial corpus of ₹ 5,000 crore and anchored by two state- owned financial institutions — insurance behemoth Life Insurance Corporation ( LIC) and Small Industries Development Bank of India (Sidbi), an institution set up to provide funding for SMEs. The fund will be modelled around similar investment vehicles set up in developed nations like Germany and Austria, to address financing challenges to start- ups, especially in the high growth sectors like technology. People with direct knowledge of the development said the Securities and Exchange Board of India ( Sebi) is in the process of finalising a framework for the co- investment fund and the announcement could be part of the Budget speech. "Sebi has sent across the final budget proposal for a coinvestment fund that is going to augment the capital requirement for SME," said a source. A co- investment fund makes an minority investment in a venture alongside a main financial sponsor. Such investments are typically made to meet additional capital needs. The proposal to set up a SME co- investment fund follows recent measures such as separate SME exchanges and the institutional trading platform (ITP), jointly taken by the finance ministry and Sebi in the past couple of years. The Sebi framework may allow the co- investment fund to invest in an SME during its initial public offer ( IPO) or even a company which lists directly through the ITP route, said a person privy to the development. ITP is a mechanism that alllows an SME to list directly without an IPO. The rationale for setting up co- investment funds is to tackle the financing difficulties of start- ups with high growth potential at the seed and early stages. The proposal to set up such a fund was first mooted during the previous Union Budget. The current finance minister Arun Jaitley will take afinal call. Experts said the fund could make a significant difference to SME funding, especially start- ups in high growth sectors like information technology. The move could also give a fillip to the SME listing platform, launched in 2012. Currently, about 60 small companies are listed on the SME exchanges of the BSE and the National Stock Exchange. Earlier, this week Sebi chairman U K Sinha said exchanges and the regulator were taking pro- active steps to ensure adequate funding to SMEs through the equities market. "Sebi, along with exchanges and Sidbi, would be meeting SMEs in the hinterlands to make access to the market and capital easier for them," he said. Govt plans a first of its kind co- investment fund to help start- ups [1]Sebi, finance ministry working on SME co- investment fund [1]Sebi readying framework for the fund worth ₹ 5,000 crore [1]Co- investment fund for SMEs to be promoted by Life Insurance Corporation and Small Industries Development Bank of India [1]Announcement likely in the Budget [1]Co- investment fund to give priority to high- growth sectors LIC, SIDBI KNIGHTS IN SHINING ARMOUR |
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