FIPB clears HDFC Bank's proposal to hike foreign holding to 74%

The HDFC stake in HDFC Bank has been considered foreign

The FIPB today cleared the long- pending proposal of HDFC Bank to hike foreign holding in the bank to 74%.

"FIPB today considered and approved HDFC Bank's proposal to raise foreign investment ceiling to 74%," 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% holding in the bank is FDI and hence total foreign holding is 73.39%, 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% from 49%.

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% holding in the bank is FDI.

Taking into consideration the 22% parent holding as FDI, the total foreign holding was more than 67.55% 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%, from its earlier proposal of 67.55%.

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.