India increases FDI limit in private banks to 74 percent

Monday, 08 March 2004, 20:30 IST
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NEW DELHI: The Indian government Friday brought into effect liberalised norms for foreign direct investment (FDI) in the financial sector allowing up to 74 percent investment in private banks. The government has notified guidelines to give effect to the decision taken on January 15, liberalising foreign investment in the banking sector, said a commerce ministry statement issued here. The limit of 74 percent FDI would be inclusive of investment by foreign institutional investors, under portfolio investment schemes by non-resident Indians and shares acquired prior to September 16, 2003 by overseas corporate bodies. It will also include public offerings, private placements, global and American depository receipts and acquisition of shares from existing shareholders. "The aggregate foreign investment in a private bank from all sources will be allowed up to a maximum of 74 percent of the paid up capital of the bank," said the statement. "At all times, at least 26 percent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank," it said, adding the guidelines would apply to all existing private sector banks. The notification clarifies that in the case of FII, the earlier restriction of investment limit of 49 percent with the approval of the board of directors followed by a special resolution by the general body would remain. In the case of NRIs, individual holding is restricted to five percent and the aggregate limit cannot exceed 10 percent. "However, NRI holding can be allowed up to 24 percent, provided the banking company passes a special resolution to that effect in the general body," the statement said. The notification states that guidelines for setting up a wholly owned subsidiary of a foreign bank will be issued later by the Reserve Bank of India.
Source: IANS
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