Issue of ICICI and HDFC Bank's foreign holding persists
By Vaibhav Aggarwal
May 5, 2010
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The commerce and industry ministry is still persistant on its say that ICICI and HDFC Bank are violators of FDI norms. The banks have 77% and 64% foreign stakeholding.

According to sources, the ministry's adamant stand might be the onset of the pressure on these banks to increase domestic shareholding in them.

Anand Sharma, the Commerce and Industry minister of India said that there would be no changes done to the FDI norms only for the banking and financial services sector.

"We are not going to revisit the foreign direct investment (FDI) norms for banks," Sharma said.

"Ownership and control ... have been defined with clarity, calculation of FDI is also much simpler. The policy has worked well," Sharma further quoted.

ICICI Bank's CEO, Chanda Kocchar said that "We are an India-originated bank, controlled by an Indian management and governed by the Reserve Bank of India (RBI)."

But the RBI is not showing any signs to come up as the savior of these banks. The apex bank had earlier hinted that it would extricate these banks from FDI norms.

"Yes, both ICICI Bank and HDFC Bank are foreign entities despite being managed by Indians. But the RBI has no say in the issue. It's for the government to decide," a very senior RBI official said.

On the other hand, deputy Governor Shyamala Gopinath said "the issue needs to be studied in greater detail."

As per Abizer Diwanji head of financial services practice for auditor and consultant, KPMG India, "Clarity will come only when the government will try to force some structure. Even if it is insisted upon, I don't think RBI will insist everyone will have to do it immediately. There will be a transition plan or even an exemption."


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