The new government will have to decide on proposals by HDFC Bank and Sistema Shyam Teleservices to increase their foreign investment as the Foreign Investment Promotion Board (FIPB) is not likely to discuss these issues when it meets on May 13.
More than two dozen issues are listed on the agenda of the next meeting, but all of these are small investment proposals as the FIPB chose not to take up any big decisions a day after polling for the 2014 general elections concludes.
"We decided to hold the meeting to keep the momentum going. All small proposals can be cleared here because otherwise there will be a lot of backlog in the first meeting under the new government," said a finance ministry official who did not wish to be identified because the election code of conduct was in force.
The FIPB usually meets once in a month and roughly 20-30 items, including one or two big-ticket ones, are on the agenda.
The official added even though the meeting was taking place under the current government, its minutes would be approved by the next government.
In its last meeting on April 23, the FIPB had deferred a decision on HDFC Bank's proposal to increase its overseas shareholding limit to 67.55 per cent from about 51 per cent at present as the industry department and the law ministry were yet to give their comments on the issue.
The foreign investment cap in private banks is 74 per cent. But HDFC, with 75.7 per cent foreign investment, holds 22.64 per cent in HDFC Bank. After a change in FDI policy through press notes in 2009, downstream investment by any entity controlled by foreign investors is taken as foreign investment.
The Reserve Bank of India has observed the overseas investment in HDFC Bank has touched 73.73 per cent. HDFC Bank, on the other hand, says the law cannot be applied retrospectively. The FIPB will have to decide whether to reject the application if the RBI's interpretation is seconded by industry department and the law ministry or to clarify the policy in such cases.
Earlier this month, Russian conglomerate Sistema JSFC-controlled Sistema Shyam Teleservices also sought the government's approval to raise the foreign stake in the firm beyond the current 74 per cent. Last July the government had allowed 100 per cent FDI in the telecom sector.
Sistema JSFC holds 56.68 per cent in Sistema Shyam Teleservices, while the Russian government holds 17.14 per cent and another 0.13 per cent is held by other foreign entities.
FURTHER DELAY
* Foreign Investment Promotion Board (fipb) to hold last meeting under the present government on May 13
* Small cases to be taken up
* HDFC Bank and Sistema Shyam's proposal not to come up
* Both the proposals would now be taken up by FIPB under the new government
