ICICI foreign co its investments subject to FDI norms: govt

The government today said that ICICI Bank and other lenders whose more than 50% equity is owned by overseas entities will be treated as foreign companies for the purpose of computing FDI.

"ICICI is an Indian bank, but it is over 50% (equity) foreign owned, it is owned by foreigners in that sense...For downstream investment it is a foreign company," Department of Industrial Policy and Promotion (DIPP) Secretary RP Singh told reporters here.

Besides ICICI Bank, the other lenders which have more than 50% foreign equity holding are HDFC Bank, Yes Bank, IndusInd Bank, Federal Bank, ING Vysya, and Development Credit Bank.

As these banks are classified as foreign entities, they will have to follow Foreign Direct Investment (FDI) guidelines before making investments in any sectors.

"If ICICI makes any downstream investment, that will be considered as FDI," he added.

As per the DIPP guidelines issued earlier in the day, "companies have now been classified into only two categories – 'companies owned or controlled by foreign investors' and 'companies owned and controlled by Indian residents'.

The new circular has done away with the earlier categorisation of 'investing companies', 'operating companies' and 'investing-cum-operating companies'.

However, Singh said the ICICI Bank has the same footing like any other bank as they are a company incorporated in India.

He said Industry ministry permits up to 74% equity in a bank to be owned by outsiders and ICICI have the right to have equity up to 74%

"That does not really affect their functioning as a bank. The obligations which they have to take as a bank, they have taken those obligations," Singh said, adding, "for downstream investment, we wanted to be sure that the parent company is controlled and owned by Indians."

In calculating indirect foreign investment in an Indian entity, the government takes into account the sum total of FDI, stake from non-resident Indians, American and global depository receipts, foreign currency convertible bonds and convertible preference shares.

The government today released the third edition of the Consolidated FDI Policy Circular, a ready reckoner on foreign investment related regulations.