New Delhi: The long pending controversial proposal of HDFC Bank to hike foreign holding would be taken up by the Foreign Investment Promotion Board (FIPB) on 1 October.

HDFC Bank’s proposal would come up for consideration in the next meeting, sources said.

Late last year, HDFC Bank had approached the FIPB for increasing the foreign holding in the bank to 67.55% from 49%. If the proposal of the bank to raise foreign investment to 67.55% is accepted, it would exceed the cap of 74%, after taking into account parent HDFC Ltd’s stake.

The Department of Economic Affairs and Department Of Industrial Policy & Promotion (DIPP) are of view that promoter HDFC Ltd’s 22.56% stake in HDFC Bank is foreign investment.

Foreign entities, including foreign institutional investors (FIIs), hold more than 77.36% in HDFC Ltd. The foreign holding in a bank cannot exceed 74% as per the existing norms.

At the end of June 2014, foreign institutional investment in HDFC Bank was 33.93%, according to BSE data. Further, foreign investors hold another 16.90% shares through American depositary receipts (ADRs) and global depositary receipts (GDRs).

If the promoter’s (HDFC Ltd) stake of 22.56% is deemed to be foreign, then the total of the above mentioned three categories would take foreign investment to over 74%.

FDI, FII, NRI holding, ADR/GDR, convertible preference shares, foreign currency convertible bonds are treated as foreign investment under the FDI policy. Investments by HDFC Ltd, which is 77.36% owned by FIIs, and associate companies, in HDFC Bank were made before 2009, when the government came out with norms to calculate the level of foreign investment in companies.

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