06 April, 2010

ICICI, HDFC Bank set to sport 'foreign' label

The new rules categorise firms which are either predominantly foreign-owned or controlled as foreign companies. In the case of ICICI and HDFC Bank, foreign investment is over 51% although management rests with Indians. India’s foreign investment rules allow for overseas investors to hold up to 74% in private banks through secondary market purchases or through Global Depository Receipts or American Depository Receipts.
The decision was taken after consultations between the Reserve Bank of India, the finance ministry and the industry ministry which lasted over an year. According to the 2009 policy of the department of industrial policy and promotions, or Dipp, any company that is majority foreign-owned or foreign-controlled is deemed to be a foreign company. If such a company invests in other companies or sets up a subsidiary then its entire investment is treated as foreign investment without taking into account the holdings of Indian shareholders.
Foreign investment in private banks is allowed up to 74%. Several Indian private banks such as ING Vysya Bank, ICICI Bank, HDFC Bank and IndusInd Bank have at least 51% foreign investment. Others such as YES Bank and Federal Bank have foreign investment precariously close to the 51% mark