Nod to HDFC Bank to raise FI limit may be delayed

The government's approval to the proposal of HDFC Bank for raising overseas shareholding limit to 67.55 per cent may get delayed as Commerce and Industry Ministry is scrutinising all foreign investments made in the bank.

The DIPP, which deals with foreign investment matters, is looking into each and every investment in the bank, including those through its parent entity HDFC Ltd to ascertain the actual quantum of overseas investment in the bank, sources said.

Last year, HDFC Bank had approached Foreign Investment Promotion Board (FIPB) for raising foreign holding in the bank to 67.55 per cent from 49 per cent.

As per the existing norms, a bank is required to take approval of FIPB for increasing its foreign shareholding limit (FII and FDI) beyond 49 per cent and up to 74 per cent. The investment till 49 per cent can be done through automatic route.

As of December 2013, foreign shareholding in the bank was at 52.18 per cent.

As the foreign holding limit in the bank was breached, the RBI directed HDFC Bank that no further purchases of the bank's shares would be allowed through Indian stock exchanges on behalf of overseas investors, including NRIs, persons of Indian origin and holders of depository receipts.

According to sources, there is still no clarity as to whether HDFC's about 22 per cent stake in HDFC Bank would qualify as foreign or domestic ownership. At present, about 74 per cent in HDFC Ltd is owned by FIIs.

Therefore, all investments in HDFC Bank are being examined by the DIPP, sources added.

In December 2013, the FIPB had deferred a decision on the proposal for want of more details.

Shares of HDFC Bank were trading at Rs 728.85, up 0.48 per cent, on the BSE.

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