The Cabinet Committee on Economic Affairs (CCEA) is likely to take up a proposal by Axis Bank to increase foreign equity from the existing 49 per cent to 62 per cent on Thursday.
The CCEA might also take up a proposal to allow Coal India Ltd to supply coal to thermal power plants from sources other than those for which linkages has been finalised. This will be provided for a period of three years from a normative date of production. In many cases, coal was not supplied due to environment concerns, officials in the know said.
Axis Bank’s proposal involving Rs 6,265.76 crore was earlier referred by the Foreign Investment Promotion Board to the CCEA. Any proposal involving foreign direct investment above Rs 1,200 crore is cleared by the CCEA.
Axis Bank, the third largest private lender in India, is seeking to raise the foreign equity limit after the Reserve Bank banned fresh purchases by foreign investors. The RBI’s action, in turn, came after foreign stake breached the sanctioned limit of 49 per cent.
Foreign shareholding in the bank, as on June 30, 2013, was 48.96 per cent and this includes investments through the FDI route in the form of Global Depository Receipts of 8.08 per cent and other foreign holdings including FIIs of 40.88 per cent.
Under the current FDI policy of the government, foreign shareholding in private sector banks is allowed up to a ceiling of 74 per cent of the paid-up voting equity capital.
The application seeks the increasing of stake provided the FII limit does not rise beyond 49 per cent.