ICICI Bank, which is majority-owned by foreigners, has welcomed the government’s decision to remove sub-limit restrictions within the overall sectoral limit of 74 per cent for private sector lenders.
Welcoming the government move, ICICI Bank managing director and chief executive Chanda Kochhar in a statement said, “The decision to remove the sub-limit restrictions within the overall limit of 74 per cent for private sector banks will provide greater flexibility to banks and investors.”
“I welcome the government decision to ease foreign investment norms in 15 sectors. The move is in line with the ongoing reform process and its objective of enhancing the ease of doing business,” she said.
Private sector lenders like ICICI Bank, HDFC Bank, Axis Bank, Federal Bank, Yes Bank among others have high foreign ownership. There was a time when the previous government was toying with the idea of technically declaring ICICI Bank and HDFC Bank as foreign entities as they were owned by foreigners at around 74 per cent. Still all these banks have very high foreign holdings.
In the private banking sector, the government has introduced full fungibility of foreign investment and accordingly, “FIIs/FPIs/QFIs, following due procedure, can now invest up to sectoral limit of 74 per cent, provided there is no change of control and management of the investee company”, the government said today.
Earlier, portfolio investment was permitted up to 49 per cent.
Rana Kapoor of Yes Bank also welcomed the move saying the approval for the composite FDI cap may appear procedural, but it is a significant reform for the economy as a whole, as there will be more capital flowing into the banking system and it will significantly ease the procedural investment decisions by foreign investors.
“For the banking sector in particular, as also for Yes Bank, it is a great development. We already have got board approval in April 2015 and an enabling approval from our shareholders for increasing the FII limit up to 74 per cent.
“Therefore, from our capital-raising perspective, we now have headroom to substantially increase FII holding, which is currently at around 42 per cent, and this will enhance flexibility of various capital-raising options, including American depository receipts/GDRs or qualified institutional placement plans,” Kapoor said.