India’s central bank may save “foreign” HDFC, ICICI

Reserve Bank of India may provide them relaxation by tagging them as foreign-owned Indian banks.

The Reserve Bank of India (RBI) may come to the rescue of banks, such as ICICI and HDFC Bank, which are majority owned by foreign funds or entities.

RBI is likely to soon issue a notification classifying them as “foreign-owned Indian banks”, even as the Department of Industrial Policy and Promotion (DIPP) is firm that any company with more than 51 per cent foreign equity should be considered as a foreign company. This definition was included in foreign direct investment (FDI) guidelines issued in February 2009.

While the DIPP has said that such banks — ICICI Bank, HDFC Bank, ING Vysya Bank, IndusInd Bank and Yes Bank — are “foreign banks”, the banking industry says despite the equity structure, majority voting rights are with Indians.

The issue was raised by ICICI and HDFC Bank, which came under the scanner, as foreign stakes in these two are about 77 per cent and 64 per cent, respectively. The two filed complaints with the finance ministry and RBI against the new definition and sought clarifications.

View the full story in Business Standard.