IAG could potentially profit from a decision by the State Bank of India (SBI) to sell shares in its insurance and asset management units to meet tighter capital requirements.

SBI has a stake in SBI General Insurance, a joint venture with the Australian insurer.

IAG has previously flagged an interest in raising its share beyond the current legal cap of 26%, if foreign investment rules are changed. It has an option to lift its stake to 49%.

“Our interest is in the SBI joint venture, so for us the interest is around an opportunity to increase our stake in that, but that is dependent on a change in the rules,” IAG spokesman Paul Marriage told insuranceNEWS.com.au.

Indian Finance Minister Arun Jaitley last month unveiled plans to raise the foreign direct investment cap on insurance, but the measure must pass both houses of Parliament.

Last week the Cabinet Committee on Economic Affairs approved raising the cap to 49%, providing management control of companies remains with Indian promoters.

The change will take effect if Parliament passes the Insurance Laws (Amendment) Bill, which has been stalled since 2008 due to a lack of political consensus.

The bank must raise more than $US13.3 billion ($14.27 billion) in additional equity capital by 2019 to comply with the Basel III regulatory regime.