The deal has valued SBI Life at Rs 46,000 crore, higher than its rival ICICI Prudential.Google Flickr

In a move to boost foreign investment in the insurance sector, the government has allowed overseas companies to buy up to 49 percent stake in India's domestic insurers without prior approval from the Foreign Investment Promotion Board (FIPB), reported the Press Trust of India.

"The foreign investment proposals up to 49 per cent of the total paid up equity of the Indian insurance company shall be allowed on the automatic route subject to verification by the Insurance Regulatory and Development Authority of India," the news agency quoted a government notification as stating.

Until now, FDI up to 26 percent was allowed through the automatic approval route, while any investment between 26 and 49 percent required the Foreign Investment Promotion Board (FIPB) approval.

PTI had earlier reported that both the regulatory agencies, the Insurance Regulatory and Development Authority of India (IRDAI) and the Reserves Bank of India (RBI), were looking into the issue. "If the management is in the hands of Indian then the government may do away with the FIPB approval route," the agencies had said.

At present, the country has a total of 53 insurance companies, with 29 of them in the non-life insurance business, and 24 in life insurance, the India Brand Equity Foundation (IBEF) stated on its website. Incidentally, the Life Insurance Corporation (LIC) is the sole public sector company in the life insurance business and there are six public sector insurers among the other insurers (non-life).

India's life insurance business is the largest in the world, with about 360 million policies. And, it is expected to climb at a compound annual growth rate (CAGR) of 12 to 15 percent, reported IBEF.

The foundation said the sector aims to increase its penetration levels to 5 percent by 2020. It added that the market size is expected to increase fourfold from its current $60 billion in the next 10 years.

On the non-life insurance business in the country, the foundation reports India is currently at $11.7 billion (Rs. 78,000 crore) premium per annum and is growing at 17 percent annually.

The FDI in India recorded a twofold increase with $4.5 billion investments in December 2015 period over $2.2 billion in the same month last year. The PTI in its report added that during April-December 2015, the FDI into the country grew by 40 percent to $29.44 billion.

The news agency reported that computer software and hardware, trading, services, automobile and telecommunications attracted the most foreign investment in the country over the years. And, the country received most of its foreign inflows from Singapore, Mauritius, the Netherlands and Japan.

In August 2014, the government also permitted 49 percent in its defence sector with FIPB approval, however.