Chennai, Feb 21 (IANS): The central government has stipulated that foreign direct investment (FDI) up to 26 percent will be allowed under automatic route.

On the other hand, the FDI above 26 percent and subject to a cap of 49 percent will be with the permission of the foreign investment promotion board (FIPB), the government notified the regulations Friday.

According to the notification, any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA).

The central government in the notification has stipulated that foreign equity investment cap of 49 percent applicable to insurers would also apply on the same terms to intermediaries like insurance brokers, third party administrators, surveyors and loss assessors and others.

Portfolio investments will also be counted for calculating the FDI cap.

However in case of a bank allowed to function as an insurance intermediary, the foreign equity investment caps applicable in that sector (banking) shall continue to apply, subject to the condition that the revenues of such entities from their primary (i.e. non-insurance related) business must remain above 50 percent of their total revenues in any financial year.

Industry experts told IANS that the notification has aligned the definition of control of Indian insurance company with that of the insurance ordinance issued earlier.