The Hindu Business Line : RBI says no to HSBC buying second tranche of 5.46 pc in UTI Bank

HSBC had applied for acquiring 20.08 per cent in UTI Bank, of which only the first tranche of 14.62 per cent of the deal aggregating Rs 304.2 crore has been cleared.

This is despite HSBC having obtained an in-principle approval from the regulator for 20.08 per cent stake in UTI Bank in December 2003 and also having applied for the same.

However, RBI curtailed the HSBC investment to 14.62 per cent. FDI limit in private sector banks is currently capped at 74 per cent provided the foreign bank merges its operations with the private bank as per Government of India guidelines issued in March 2004.

"We are happy with the outcome. We continue to look at it as a financial investment and we remain comfortable with that. We are free to sell the stake. But we are not looking at that option now,'' said Mr Niall S.K. Booker, CEO, HSBC Ltd India, at a press conference held here on Thursday to announce the completion of the transaction between HSBC and private equity firm, Actis [formerly known as CDC Financial Services (Mauritius) Ltd and South Asia Regional Fund]. Actis now holds the remaining over 5 per cent stake in UTI Bank but has resigned from the private bank's board of directors.

Asked on what grounds RBI refused the second tranche of the transaction said Mr Booker, "RBI did not cite any reasons for the same.'' HSBC has also been asked not to pursue the matter any further.

The RBI approval, which came after a six-month wait, came with the following conditions - HSBC should not make any further purchases in UTI Bank shares without RBI consent, it was denied directorship and restrictions have been placed on HSBC's transactions with UTI Bank which may be viewed as "strategic or that are within arm's length distance".

While transactions such as day-to-day treasury market deals, correspondent banking and debt issue syndications will be permissible, HSBC has applied for RBI permission for other transactions such as ATM sharing and purchase of UTI Bank shares through HSBC mutual fund.

"We should not jump the gun and think RBI's conditions to be restrictive. These permissions may be forthcoming. Only time will tell if these are undue restrictions or not,'' said Ms Naina Lal Kidwai, Deputy CEO, HSBC Ltd, who was also present at the press conference.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
TCS files draft prospectus for IPO — 5.5 crore shares on offer; face value at Re 1; provision of greenshoe option

May spur shuffle in other IT stocks

IHCL intends to divest TCS shares

RBI says no to HSBC buying second tranche of 5.46 pc in UTI Bank

Slump in stock prices prompts promoters to pick up shares

Kashmir link project — Rlys to move coaches from Chennai by air