FIPB clears HDFC Bank's proposal to hike foreign holding

The FIPB on Friday cleared the long-pending proposal of HDFC Bank to hike foreign holding in the bank to 74 per cent.

"FIPB today considered and approved HDFC Bank's proposal to raise foreign investment ceiling to 74 per cent," officials said after the meeting of the Foreign Investment Promotion Board.

The FIPB is of the view that HDFC Bank' parent HDFC Ltd's 22 per cent holding in the bank is FDI and hence total foreign holding is 73.39 per cent, which includes FII, FDI, ADR and GDR.

"So the bank has little headroom to raise funds from foreign investors," the official said.

Late last year, HDFC Bank had approached the FIPB for increasing the foreign holding in the bank to 67.55 per cent from 49 per cent.

However, the proposal was not cleared by the FIPB as the Finance and Industry ministry was of the view that the parent HDFC Ltd's 22 per cent holding in the bank is FDI.

Taking into consideration the 22 per cent parent holding as FDI, the total foreign holding was more than 67.55 per cent when they approached the FIPB for the first time.

Following clarification sought by FIPB earlier this year HDFC Bank sent a revised proposal raising its foreign holding ceiling request to 74 per cent, from its earlier proposal of 67.55 per cent.

Further, the proposal of pharma company Sanofi was cleared by FIPB in today's meeting along with Punj Llyod's proposal to enter into defence space.