In February 2022, the Union Cabinet permitted up to ______ foreign direct investment (FDI) under automatic route in Life Insurance Corporation of India (LIC).

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AAI Junior Assistant (Fire Service) Official Paper (Held On: 15 Nov 2022 Shift 1)
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  1. 25%
  2. 10%
  3. 20%
  4. 15%

Answer (Detailed Solution Below)

Option 3 : 20%
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The correct answer is 20%.

Key Points

  • In February 2022, the Union Cabinet permitted up to 20% foreign direct investment (FDI) under the automatic route in Life Insurance Corporation of India (LIC).
  • The decision was made to facilitate foreign investment in the IPO-bound LIC.
  • Prior to this decision, there was no specific provision for foreign investment in LIC under the automatic route.
  • This move was aimed at making LIC's initial public offering (IPO) more attractive to foreign investors.
  • The approval is part of broader efforts to liberalize FDI policies in the insurance sector.

Additional Information

  • FDI in Insurance Sector
    • The insurance sector in India has seen gradual liberalization, with the FDI cap being raised from 26% to 49% in 2015, and later to 74% in 2021.
    • The increase in FDI limits aims to attract more foreign capital and enhance the growth of the insurance industry in India.
  • Life Insurance Corporation (LIC)
    • LIC is the largest insurance company in India, established in 1956.
    • It has a significant market share and a vast network across the country.
  • IPO (Initial Public Offering)
    • An IPO is the process through which a private company offers its shares to the public for the first time.
    • LIC's IPO is expected to be one of the largest in the history of Indian capital markets, aiming to raise substantial funds.
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