HDFC and ICICI Bank likely to be extricated by RBI from FDI norms
By Neelima Shankar
Apr 14, 2010
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HDFC and ICICI Bank are passing through a tough time with the new FDI norms adamant on declaring them as foreign banks. Now the RBI is likely to come to the rescue of these banks.

It is likely that the apex bank would soon be issuing a notification which would classify these banks as "foreign-owned Indian banks". This step by RBI would be much against the stance of the Department of Industrial Policy and Promotion (DIPP) that any company which has more than 51% of its shares under the hold of foreign investors should be considered as a foreign company.

This definition of foreign company was included in the foreign direct investment (FDI) guidelines issued in February 2009.

Other names like ING Vysya Bank, IndusInd Bank and Yes Bank are also in the list of banks to be considered as foreign banks. They however defend themselves saying that despite the equity share, majority of the voting rights are with Indians.

The issue came into limelight with ICICI and HDFC Bank filing complaints against RBI and Finance Ministry regarding the new FDI norms and sought clarifications.

These banks have 77 and 64% foreign stakes in them respectively.

"RBI can issue a notification and provide relaxation by stating that these banks are foreign-owned Indian banks, but there will be no changes in FDI norms. Also, no exceptions will be made. RBI as well as finance and commerce ministries are on board on this. However, in case some banks face an issue, RBI can provide relaxations, as they continue to be governed by its licensing rules," a senior government official said.

The main fear of these banks is that if they are added in the list of foreign companies then their investments would be affected as many sectors have ceilings on the amount of FDI allowed in them, the biggest one being insurance.


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