ICICI Bank, HDFC Bank play down 'foreign' tag

The country's two largest private sector lenders--ICICI Bank and HDFC Bank--today played down concerns about being treated as foreign banks on account of majority foreign shareholding in them, saying they continue to remain Indian.

The two--along with five other private sector banks --are likely to get impacted by the new FDI policy as foreign shareholding in these entities in different forms like ADRs and GDRs exceeds 50 per cent. This could make them ineligible for being treated as domestic entities.

The other five banks which are likely to get impacted by this are Yes Bank, IndusInd Bank, Federal Bank, ING Vysya and Development Credit Bank.

"Our management continues to be Indian. We continue to remain as a bank of Indian origin. Beyond that the classification of shareholding does not really impact our day-to-day performance," ICICI Bank managing director and chief executive Chanda Kochhar told reporters here today.

The government decision is likely to impact the future investment plans of these banks in their subsidiaries or in sectors like insurance where there is a cap on foreign investment, could be impacted since capital infusion by parent companies would be treated as inflows from overseas sources, but Kochhar said this is not a major concern with the bank.

"We, in any case, do not invest in equity shares of other companies in a big way. So in that sense, it does not really change life for us," Kochhar explained.

The second largest private sector lender HDFC Bank's managing director Aditya Puri also echoed a similar view, saying the FDI policy does not create any issue for the bank and that the bank continues to be an Indian lender with voting rights resting with Indians.

"Voting rights are with Indians. There is no issue as such. The fact is that we are an Indian bank and the voting rights are with Indians. Then how can you say we are a foreign bank," Puri quipped.

The government today said the new FDI policy "is doing well", signalling that at least seven private sector banks may be termed as foreign sector lenders, as their foreign ownership is above 50 per cent.

According to the Press Notes 2, 3 and 4 of the Department of Industrial Policy and Promotion, for a company or entity to be treated as Indian, foreign investment, including American and global depository receipts, foreign currency convertible bonds, convertible preference shares and from NRIs in it should be less than 50 per cent.

Concerned over the issue, some of the banks like ICICI Bank, had approached the government and the Reserve Bank earlier.

"Yes there are some banks and the talks have been there between the RBI, finance and commerce and industry ministries. But as of now, the policy which is there, is doing very well," commerce and industry minister Anand Sharma said in New Delhi today. He further said, "as far as ownership and control are concerned,it has been defined with clarity and the calculation for FDI is much simpler. We have to look at it not from a narrow prism."