The country’s largest private sector lender HDFC Bank will have to wait a few more weeks for the government clearance for an increase in its foreign investment limit. This is because the meeting of the Foreign Investment and Promotion Board that was scheduled for later this week has now been pushed back to October 21.
“The FIPB will now meet on October 21 as against the earlier date of October 1. The agenda for the meeting will remain the same,” said a senior government official.
The bank has now submitted a fresh proposal seeking post -facto confirmation of its foreign investment of 74 per cent.
“A decision should hopefully be taken in the next meeting as the case has been pending for long. All comments have also been received,” said the official.
HDFC Bank had last year approached the FIPB to increase the foreign holding in the bank to 67.55 per cent from 49 per cent. However, according to FDI norms, foreign investment up to 49 per cent in banks can be done through the automatic route. But a bank is expected to take FIPB approval to increase its foreign shareholding limit (FII and FDI) beyond 49 per cent up to 74 per cent. At the end of June 2014, foreign institutional investment (FII) in HDFC Bank was 33.93 per cent while foreign investors hold another 16.90 per cent shares through ADRs and GDRs, according to data from the Bombay Stock Exchange.
According to sources, the finance ministry as well as the department of industrial policy and promotion have contended that the promoter HDFC Ltd’s 22.56 per cent stake in HDFC Bank is foreign investment. So if the bank’s proposal to raise foreign investment to 67.55 per cent is accepted, it would exceed the cap of 74 per cent.