Financial Daily from THE HINDU group of publications
Wednesday, Dec 21, 2005
Financial Daily from THE HINDU group of publications Wednesday, Dec 21, 2005 |
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Public Sector Banks Money & Banking - Foreign Institutional Investors Government - Policy Govt rules out immediate hike in FII limit in PSU banks Sarbajeet K. Sen
New Delhi , Dec. 20 THE long wait for a hike in foreign institutional investor (FII) investment limit in public sector banks is set to continue for some more time. The Government has said that it is not considering any proposal for a hike in the cap at present and that any hike could be a long-winding process since it would invariably require clearance from the Parliamentary Standing Committee on Finance. "There is no proposal with us at present for increasing the investment limit for FIIs in PSU banks," top Finance Ministry officials told Business Line. The present cap on FII investment in Government-owned banks stands at 20 per cent. Recently, there has been renewed speculation that the FII limit is set to be hiked with reports even suggesting that the fresh limit under consideration was 24 per cent. "This is far from truth," officials said. They said that even if the Government wanted, it could not have gone ahead with any proposal to hike the limit since there were procedural hurdles in moving amendments to the Banking Companies (Acquisition and Transfer of Assets) Acts of 1970 and 1980 which limit the cap to 20 per cent. "There is already an bill to amend the Banking Companies Act pending in Parliament. I cannot propose fresh amendments at this time. Moreover, such a move would definitely require the approval of the Standing Committee of Finance," officials said. PSU banks stocks, that have somewhat fallen out of favour during the past couple of weeks of the recent bull-run, has once again staged a comeback during the past couple of days on the back of speculations on possibility of more FII investment in these stocks. FII investment has reached near ceiling in several top Government-owned banks. A hike in the cap could have once again stimulated FII interest thereby bringing these stocks into centre-stage. PSU banks have on and off been sounding out the Government for increasing the cap to enable greater participation of FIIs in their stocks. However, in view of the sensitive nature of the issue, successive Governments have been going slow on the matter.
Related Stories: More Stories on : Public Sector Banks | Foreign Institutional Investors | Policy
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