The Central government is considering permitting foreign direct investment (FDI) in the country's largest insurer Life Insurance Corporation of India (LIC), a move which would help overseas investors take part in the company's proposed mega Initial Public Offering ( IPO).

The proposal is reportedly under discussion between the Department of Financial Services (DFS) and the Department of Investment and Public Asset Management (DIPAM). A  Source said that "Discussions have been going on for the proposal for the last few weeks. It would also go for inter-ministerial discussions and would also require Cabinet approval."  According to the current foreign direct investment policy, 74 percent of overseas investment is allowed under the automatic route in the insurance sector. However, these regulations do not apply to LIC, which is administered through a separate LIC Act. 

As per the capital market regular SEBI rules, both Foreign Portfolio Investment and Foreign direct investment are allowed under public offer. However, since LIC Act has no provision for foreign investments, there is a need to align the proposed LIC IPO with SEBI norms regarding foreign investor participation. The Cabinet had in July approved the IPO of LIC. 

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