Legislation that could pave the way for IAG to raise its stake in an Indian joint venture has stalled amid parliamentary wrangling in Delhi.

The Insurance (Amendment) Bill would raise the cap on foreign investment in the sector from 26% to 49%, allowing the Australian insurer to lift its holding in the State Bank of India subsidiary SBI General Insurance by the same amount.

In the past two weeks the Indian Government has twice sought to introduce the bill to Parliament, only to be blocked by the opposition.

However, reports suggest the ruling Bharatiya Janata Party and the Indian National Congress may be ready to negotiate a deal that would see the legislation sent to a select committee and pass later this year.

The Government has delayed introducing the bill because it has not secured the votes from smaller parties that it needs to steer the legislation through Parliament.

The State Bank of India recently announced its intention to sell shares in its insurance and asset management units, to meet tighter capital requirements.

It also owns 74% of SBI Life Insurance, with BNP Paribas Cardif SA holding the rest.

If the sector is opened further, the Government expects insurers such as Canada’s Sun Life Financial, Prudential, Nippon Life Insurance, Italy’s Generali and Dutch insurer Aegon to invest further in the country.

India is the world’s 10th-largest life insurance market, even though fewer than 4% of people currently have cover.