The figure needs to be revised upwards as it is almost five years since the Malhotra Committee on Insurance Reforms recommended Rs 100 crore as the minimum paid-up capital for private companies, a senior ministry official said.

The ministry feels that if the cabinet and then parliament clear the way for foreign insurance companies to participate in joint ventures, these companies which will be required to bring in their equity in foreign currency should not get the benefit of rupee devaluation. Since the Malhotra Committee's report in January 1994, the rupee has fallen by almost as much as 40 per cent against the dollar. Also, the ministry is of the opinion that on account of inflation the figure of Rs 100 crore needs to be pushedupwards.

While the ministry wants to keep entry barriers high for private players as it only wants "strong and genuinely interested companies", it does not want to raise the pain level for the new companies, the official said. The ministry is seized of the fact that if foreign companies are allowed equity participation to a small extent, most Indian companies will find it difficult to garner resources to contribute their share of equity.

Many companies, both Indian and foreign which have signed memoranda of understanding for forming joint venture companies, in their representations to the ministry have argued that the minimum capital level should not be too high. They have said that a very high level of start-up capital is not necessary in the initial period.

During the first year or two when the risk underwritten will not be high, the companies will be left with "extra capital" after meeting their capital adequacy and solvency margin requirements, they have argued. With the markets in doldrums, thecompanies have said that profitability will get depressed as there are no suitable options for deploying the "extra capital". The ministry feels that the issue of minimum capital is complex which cannot be solved by an easy formula.

It is of the view that the issue has to be seen in the context of several factors. Before the ministry finally decides on a figure, it is in the process of talking to prospective entrants. It is also studying regulations in other countries to get a well-rounded perspective.