Foreign direct investment limit in insurance sector is likely to be hiked to 49 per cent only after the Lok Sabha elections.

The move, which is expected to facilitate more capital inflow and fuel growth in the insurance sector, would provide relief to some of the Indian promoters and enable foreign players to increase their stake to over 26 per cent in joint ventures.

After a proposal from finance ministry last year, the Department of Industrial Policy and Promotion has sent a consolidated proposal to the Group of Ministers for hiking FDI limits in aviation, telecom and insurance.

Although the GoM has already taken a decision on aviation and telecom, a final view on insurance is yet to be taken, as it would involve legislative amendments, a senior finance ministry official told PTI in New Delhi on Wednesday.

"The finance ministry is in favour of hiking the FDI limit in insurance from 26 to 49 per cent. But it would require legislative changes. It would not be possible before the Lok Sabha election is over," he said.

Once, the GoM approves the proposal, it will be taken up by the Cabinet and then Parliament's nod would be sought for necessary amendments in IRDA Act to be carried out to raise the FDI ceiling.

Moreover, the Law Commission in consultation with the finance ministry and the Insurance Regulatory and Development Authority is giving final touches to a comprehensive insurance act by merging the Insurance Act of 1938 and IRDA Act of 1999 and overhauling outdated legislations, sources said, adding IRDA may be mandated to fix FDI limit as and when desired.

Most of the private insurance companies were growing by almost 100 per cent in the initial years of operations and had to infuse capital in tandem to meet IRDA's stiff solvency margin norms.

The solvency norms stipulate life insurers to keep assets in excess of liabilities in the proportion of 150 per cent.

Some of the Indian promoters, who hold 74 per cent in thejoint venture, were finding it difficult to shell out the.

Accordingly, the insurance industry had been pitching for raising the FDI limit to at least 49 per cent, which would give some respite to the Indian promoters and at the same time allow deep-pocket foreign players to bring in more capital in the country.

So far, promoters of companies like ICICI Prudential Life Insurance, HDFC Standard Life, Birla Sunlife, Max NY Life and Aviva have infused additional capital in their ventures to maintain the company's growth momentum.

Till date, IRDA has given licence to 12 private life insurers -- ICICI Prudential, HDFC Standard Life, Birla Sunlife, Max New York Life, Tata AIG Life, Allianz Bajaj Life, SBI Life, ING Vysya, Aviva, OM Kotak, Metlife and AMP Sanmar.

The regulator has also allowed eight private general insurers -- Reliance, Royal Sundaram, ICICI Lombard, IFFCO Tokio, Bajaj Allianz, Tata AIG, HDFC Chubb and Cholamandalam.

Government has received at least Rs 5,000 crore or over $1.0 billion in FDI from the initial capital inflow from the foreign partners of the private insurers in the last three years.