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    Malhotra Committee

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    ajucoolest
    The Malhotra Committee was formed in 1993 to evaluate and recommend reforms to the Indian insurance industry. The committee submitted its report in 1994 which recommended major reforms including reducing government stake in insurance companies to 50%, allowing private companies to enter the sector with a minimum capital of 1 billion rupees, and establishing an independent insurance regulatory body. The reforms aimed to make the industry more efficient and competitive while exercising caution in opening it up to competition.

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    Malhotra Committee

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    ajucoolest
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    The Malhotra Committee was formed in 1993 to evaluate and recommend reforms to the Indian insurance industry. The committee submitted its report in 1994 which recommended major reforms including reducing government stake in insurance companies to 50%, allowing private companies to enter the sector with a minimum capital of 1 billion rupees, and establishing an independent insurance regulatory body. The reforms aimed to make the industry more efficient and competitive while exercising caution in opening it up to competition.

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    The Malhotra Committee was formed in 1993 to evaluate and recommend reforms to the Indian insurance industry. The committee submitted its report in 1994 which recommended major reforms including reducing government stake in insurance companies to 50%, allowing private companies to enter the sector with a minimum capital of 1 billion rupees, and establishing an independent insurance regulatory body. The reforms aimed to make the industry more efficient and competitive while exercising caution in opening it up to competition.

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    Download as PDF, TXT or read online from Scribd
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    368 views2 pages

    Malhotra Committee

    Uploaded by

    ajucoolest
    The Malhotra Committee was formed in 1993 to evaluate and recommend reforms to the Indian insurance industry. The committee submitted its report in 1994 which recommended major reforms including reducing government stake in insurance companies to 50%, allowing private companies to enter the sector with a minimum capital of 1 billion rupees, and establishing an independent insurance regulatory body. The reforms aimed to make the industry more efficient and competitive while exercising caution in opening it up to competition.

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    In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N.

    Malhotra was formed to evaluate the Indian insurance industry and recommend its future

    direction. The Malhotra committee was set up with the objective of complementing the reforms

    initiated in the financial sector. The reforms were aimed at creating a more efficient and

    competitive financial system suitable for the requirements of the economy keeping in mind the

    structural changes currently underway and recognizing that insurance is an important part of

    the overall financial system where it was necessary to address the need for similar reforms. In

    1994, the committee submitted the report and some of the key recommendations included:

    i) Structure

    Government stake in the insurance Companies to be brought down to 50%. Government

    should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as

    independent corporations. All the insurance companies should be given greater freedom to

    operate.

    ii) Competition

    Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the

    sector. No Company should deal in both Life and General Insurance through a single entity.

    Foreign companies may be allowed to enter the industry in collaboration with the domestic

    companies.

    Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life

    Insurance Company should be allowed to operate in each state.

    iii) Regulatory Body


    The Insurance Act should be changed. An Insurance Regulatory body should be set up.

    Controller of Insurance- a part of the Finance Ministry- should be made independent

    iv) Investments

    Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to

    50%. GIC and its subsidiaries are not to hold more than 5% in any company (there current

    holdings to be brought down to this level over a period of time)

    v) Customer Service

    LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be

    encouraged to set up unit linked pension plans. Computerisation of operations and updating of

    technology to be carried out in the insurance industry

    The committee emphasized that in order to improve the customer services and increase the

    coverage of insurance policies, industry should be opened up to competition. But at the same

    time, the committee felt the need to exercise caution as any failure on the part of new players

    could ruin the public confidence in the industry. Hence, it was decided to allow competition in

    a limited way by stipulating the minimum capital requirement of Rs.100 crores.

    The committee felt the need to provide greater autonomy to insurance companies in order to

    improve their performance and enable them to act as independent companies with economic

    motives. For this purpose, it had proposed setting up an independent regulatory body- The

    Insurance Regulatory and Development Authority.

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