Nod to HDFC Bank to raise foreign investment limit may be delayed

Last year, the bank had approached FIPB for raising foreign holding in the bank to 67.55%

The government's approval to the proposal of HDFC Bank for raising overseas shareholding limit to 67.55% may get delayed as Commerce and Industry Ministry is scrutinising all foreign investments made in the bank.

The DIPP, which deals with foreign investment matters, is looking into each and every investment in the bank, including those through its parent entity HDFC Ltd to ascertain the actual quantum of overseas investment in the bank, sources said.

Last year, HDFC Bank had approached Foreign Investment Promotion Board (FIPB) for raising foreign holding in the bank to 67.55% from 49%.

As per the existing norms, a bank is required to take approval of FIPB for increasing its foreign shareholding limit (FII and FDI) beyond 49% and up to 74%. The investment till 49% can be done through automatic route.

As of December 2013, foreign shareholding in the bank was at 52.18%.

As the foreign holding limit in the bank was breached, the RBI directed HDFC Bank that no further purchases of the bank's shares would be allowed through Indian stock exchanges on behalf of overseas investors, including NRIs, persons of Indian origin and holders of depository receipts.

According to sources, there is still no clarity as to whether HDFC's about 22% stake in HDFC Bank would qualify as foreign or domestic ownership. At present, about 74% in HDFC Ltd is owned by FIIs.

Therefore, all investments in HDFC Bank are being examined by the DIPP, sources added.

In December 2013, the FIPB had deferred a decision on the proposal for want of more details.

Shares of HDFC Bank were trading at Rs 728.85, up 0.48%, on the BSE.