ICICI, HDFC Bank to be treated as foreign banks
Monday, 05 April 2010, 23:49 IST   |    3 Comments
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ICICI, HDFC Bank to be treated as foreign banks
New Delhi: ICICI Bank and HDFC Bank, in overseas investors own more than 51 percent equity, is likely to be treated as foreign banks, as Indian government has decided not to make any further changes to its new policy on overseas investment. The government's decision may impact future investment plans of these banks in subsidiaries or in sectors where there is a cap on foreign investment. The new rules categorize firms which are either predominantly foreign-owned or controlled as foreign companies. In the case of ICICI and HDFC Bank, foreign investment is over 51percent although management rests with Indians. Talking to Economic Times on this issue, Union Commerce and Industry Minister Anand Sharma said that banks will not be excluded from the new norms. "I feel that this policy has done well. It was cleared by an empowered group of ministers. I don't think that is a large enough issue to reflect on the entire policy regime. I don't think there is any anxiety on this issue," said Minister. The decision has been taken after discussions 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. "We will not be changing our policy or providing exemptions to banks from the new FDI (foreign direct investment) norms issued. The matter has been communicated to the finance ministry which is also on board with our decision," said a Government official to Economic Times.

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