The government has notified amendment to non-debt instrument rules under the Foreign Exchange Management Act (FEMA), clearing the way for up to 20% foreign direct investment in Life Insurance Corporation (LIC).

On March 14, the Department for Promotion of Industry and Internal Trade (DPIIT) had amended the FDI policy to facilitate foreign investment in the country’s largest insurer ahead of its mega initial public offer.

FEMA notification was required to operationalise provisions DPIIT issued through press note including FDI policy changes that will allow large foreign investors to subscribe to LIC’s IPO.

“These changes, among others, were brought in to permit up to 20% foreign direct investment in LIC of India ahead of its IPO,” said Nischal S Arora, partner – regulatory at business consultant firm Nangia Andersen LLP.

Till now, the FDI policy did not prescribe any specific provision for foreign investment in LIC, which is a statutory corporation established under LIC Act, 1956.

Other amendments include extension of minimum mandatory conversion period of convertible notes issued by startup companies recognised by DPIIT to 10 years from five years. This decision is likely to benefit such startups to raise funds from investors who may want additional cushion for their investments by keeping them as debt for a longer duration.