CCEA approved HDFC Bank’s proposal to raise foreign holding limit to 74 per cent

The Cabinet Committee on Economic Affairs (CCEA) on 28 January 2015 approved a proposal of HDFC Bank to raise the foreign holding limit to 74 per cent. The decision will enable inflow of around 10000 crore rupees into the country from overseas investors.

HDFC Bank would raise the fund through issuing of equity shares to non-resident Indians (NRIs) or foreign institutional investors (FIIs) or foreign portfolio investors (FPIs) subject to aggregate foreign shareholding not exceeding 74 per cent of the post issue paid up capital.

Earlier in November 2014, Foreign Investment promotion Board (FIPB) had cleared the proposal of HDFC Bank to hike the foreign holding limit to 74 percent.

Total foreign investment in HDFC Bank was 73.39 percent at the end of June 2014. It had come down to 73.2 percent at the end of September 2014.

Besides, CCEA also allowed drug maker Lupin to raise the limit of Foreign Institutional Investor (FII) holding to 49 percent. This would facilitate an inflow of 6099 crore rupees.As per the norms, the Foreign Investment Promotion Board (FIPB) can only take up FDI proposals up to  1200 crore rupees. Beyond that, they are sent to CCEA for approval.

Also, Banks can have up to 49 percent foreign investment without regulatory approval but require approval from the RBI and FIPB if they want to increase the foreign investment limit to 74 percent.

While India allows FDI in most of the sectors through automatic route, FIPB in the Union Finance Ministry is required in certain sectors like pharmaceutical and defence which are considered sensitive for the economy.