The Cabinet Committee on Economic Affairs (CCEA) today cleared a proposal of HDFC Bank to raise Rs 10,000 crore from foreign investors.
The meeting, chaired by Prime Minister Narendra Modi, approved the HDFC Bank proposal that will raise its foreign holding to 74 per cent, enabling inflow of around Rs 10,000 crore from overseas investors, an official statement said.
Total foreign investment in HDFC Bank was 73.39 per cent at the end of June 2014. It had come down to 73.2 per cent at the end of September.
The funds would be raised by issuing shares to non- resident Indians or FIIs or foreign portfolio investors subjected to aggregate foreign shareholding not exceeding 74 per cent of the post issue paid up capital, said the statement.
“The approval would result in foreign investment of Rs 10,000 crore (approximately) in the country,” it said.
As per the norms, FIPB can only take up FDI proposals up to Rs 1,200 crore. Beyond that, they are sent to CCEA for clearance
Last month, the Foreign Investment Promotion Board cleared the HDFC Bank proposal for expanding its equity base by up to Rs 10,000 crore.
Earlier, in November, FIPB had cleared the long-pending proposal of HDFC Bank to hike foreign holding to 74 per cent.
Banks can have up to 49 per cent foreign investment without regulatory approval but require approval from RBI and the FIPB if they want to increase the foreign investment limit to 74 per cent.
While India allows FDI in most of the sectors through automatic route, FIPB in the Finance Ministry is required in certain sectors like pharmaceutical and defence, considered sensitive for the economy.