The Finance Ministry will take up HDFC Bank’s proposal seeking an increase in foreign investment in the bank on October 21, said a senior government official.

“The FIPB will meet on October 21. Yes…the HDFC Bank’s proposal for an increase in FII limit is on the agenda,” the official confirmed. The country’s second largest private sector lender has, according to reports, sought an increase in the FII limit to 74 per cent. The proposal has been pending since last year.

“A decision should hopefully be taken in the next meeting. The board will take it up as it is on the agenda,” the official said.

A bank has to take FIPB approval to increase its foreign shareholding (FII and FDI) limit beyond 49 per cent up to 74 per cent.

FDI norms

According to reports, HDFC Bank had last year approached the Foreign Investment Promotion Board to increase the foreign holding in the bank to 67.55 per cent from 49 per cent. According to FDI norms, foreign investment up to 49 per cent in banks can be done through the automatic route. In a fresh petition, the bank had also mentioned that promoter HDFC Ltd’s stake in the bank is not foreign.

However, reports suggest that the Department of Economic Affairs (DEA) and the Department of Industrial Policy and Promotion (DIPP) are of the view that promoter HDFC Ltd’s stake in HDFC Bank is foreign investment.

An email sent to the spokesperson remained unanswered.

If the proposal is approved, the FII limit may exceed 74 per cent, after taking into account promoter HDFC Ltd’s stake of 22.50 per cent.

Finance Secretary Arvind Mayaram had earlier said it is a very complex issue and the Government is dealing with it.

As on September 2014, the FII holding in HDFC Bank was at 33.84 per cent while foreign investors hold another 16.86 per cent shares through ADRs and GDRs, according to data from the Bombay Stock Exchange.

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