The total foreign investment permitted in a private sector bank is 74% of its paid-up capital, within which the cap on aggregate foreign investment by foreign institutional investors (FII) is 24%.
“This may be enhanced by the way of a special resolution of shareholders of the concerned bank to 49%, which the bank has already done,” HDFC Bank said in a BSE notification.
Since the proportion of ADR/GDR amounts to 18.55% of the bank's paid-up capital, the total FII and FDI limit available for foreign investments in HDFC Bank totals 67.55 % of the paid-up capital.
“It is, therefore, proposed to pass an enabling resolution of the shareholders, approving an aggregate foreign investment limit (inclusive of FII, FDI and indirect foreign investment) of 74% of the bank’s paid-up capital,” the bank informed shareholders.
The bank's earlier proposal to raise its foreign shareholding from the current 49% to 67.55% has not been decided on by the foreign investment promotion board (FIPB).
Since foreign direct investment (FDI) rules prescribe that banks need FIPB approval to increase foreign shareholding from 49% to a maximum of 74%, HDFC Bank in December last year had sought its permission to raise it to 67.55%. The FIPB had had given approval to Axis Bank in September last year to increase its foreign holding from 49% to 62%.
According to the 2009 FDI policy, a company with more than 50% shares owned by foreigners would be considered foreign-owned and any investment by that entity in an Indian company would also be come under the purview of foreign investment. The case in point is HDFC with 75.71% shares held by foreign institutional investors (FIIs).