New Delhi: The government is holding consultations with the Reserve Bank of India (RBI) on the contentious issue of whether banks, which have over 50% foreign ownership but are run by Indians should be exempted from the new FDI norms.
“One limited area is under discussion - that is banking sector. We are holding discussion with RBI,” secretary in the Department of Industrial Policy and Promotion Ajay Shankar said at the Economic Editors Conference here on Wednesday.
According to the norms issued in February this year, both ownership and control of banks should be in the Indian hands for them to qualify as domestic entities.
These norms created a peculiar problem for banks like ICICI Bank, HDFC, ING Vyasya and few more since their American and Global Depository Receipts would also be considered while calculating foreign ownership.
After the GDRs and ADRs along with other overseas holdings are taken into account, they do not qualify as domestic entities. This could mean that they will have to adhere to the caps of 26% in sectors like insurance in their joint ventures.