India’s union cabinet has approved amendments to allow foreign direct investment (FDI) in government-backed Life Insurance Corporation of India (LIC), media reports said.

The move clears the way for up to 20% FDI in LIC, which is set to launch an initial public offering (IPO) soon, through the automatic route.

“Since, as per the present FDI policy, the FDI ceiling for public sector banks is 20% on government approval route, it has been decided to allow foreign investment up to 20% for LIC and such other bodies corporate. Further, in order to expedite the capital raising process, such FDI has been kept on the automatic route, as is in the case of rest of the insurance sector,” Business Standard reported citing government sources.

Currently, FDI is not allowed in the LIC, which is governed by special acts, whereas a 74% FDI is allowed in other private players in the insurance space.

According to the Department for Promotion of Industry and Internal Trade’s (DPIIT) existing FDI policy, FDI is allowed in “insurance companies” and “intermediaries or insurance intermediary” and LIC does not fall in any of these categories.

Other rules such as the LIC Act, 1956, the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999 do not have a provision for FDI in LIC.

Earlier this month, LIC filed its papers with the regulator to launch an $8bn IPO by March 2022.

The government plans to sell 316.25 million shares or a 5% stake in the insurer, which is said to control over 60% of India’s life insurance market by premium.

The news comes amid the Russia-Ukraine crisis but government sources have assured that the IPO will proceed as planned.