Govt May Hike FDI Cap In Private Banks Today

New Delhi, Feb 25: | Updated: Feb 26 2004, 05:30am hrs
The Government will soon come up with detailed guidelines for private banks including hike in the foreign holding from 49 to 74 per cent and allowing foreign banks to set up subsidiaries in the country.

We have given the papers to the department of industrial policy and promotion. It (notification) may come tomorrow, finance secretary NS Sisodia told PTI on Wednesday.

The guidelines are being awaited by a host of private banks like Centurion Bank, Global Trust Bank, IDBI Bank, who want to increase their capital base and carry out expansions.

Foreign banks like HSBC, ABN Amro Bank, Standard Chartered Bank and Nova Scotia are also eyeing subsidiaries in India following the relaxation of the FDI norms.

Although the cabinet had approved the proposal for hiking FDI ceiling in private banks on January 15, the finance ministry and Reserve Bank were fine-tuning the guidelines.

The FDI hike in banking sector was first suggested by the NK Singh panel but the finance ministry and RBI had added a slew of stringent conditionalities to prevent ownership of banks going into wrong hands.

Sources in the ministry said the guidelines would allow FDI ceiling to go up to 74 per cent from the present 49 per cent but the investors mandatorily need to get a credit rating and RBIs nod.

The overall 74 per cent foreign holding would include foreign direct investment (FDI), foreign institutional investments (FII), NRIs, initial public offers, private placements and ADRs/GDRs.

The FDI ceiling will not be applicable for PSU banks while limit remains at 26 per cent for insurance companies.