Private lenders including Axis Bank, YES Bank, Kotak Mahindra Bank and even Federal Bank stand to benefit from the government’s move to remove the distinction between foreign portfolio investment (FPI) and foreign direct investment (FDI), reports fe Bureau in Mumbai. The Bank Nifty rose 616.65 points on Saturday after finance minister Arun Jaitley said he will club foreign investments like FPI and FDI under a composite cap. Currently, the limit for FPI in banks is 49% while the FDI cap is 74%;.now FIIs will have headroom to buy into some private sector bank stocks. The FII holding in Axis Bank is currently around 48%, almost near the cap of 49% under the present rules. In YES Bank it is at 46% while in ICICI Bank it is 41.74%. “The move is positive for private banks and it will increase the FII investment limit (including FDI) in private banks to 74% from the current 49%,” Kotak Securities wrote in a note.
A Credit Suisse report notes that even small banks such as Karur Vysya Bank, Karnataka Bank and South Indian Bank will see an expansion of their current headroom to attract more FII stake. However, in the case of large lenders such as HDFC Bank and ICICI Bank, the incremental room to raise FII holdings is minimal. Taking into account the American depository receipts and global depository receipts issued by both lenders, the incremental room for HDFC Bank is a mere 1.7% while that of ICICI Bank is 3.2%.