New Delhi: Officials of the finance ministry and the Department of Industrial Policy and Promotion (DIPP) will meet on Tuesday to deliberate on the proposal to raise the overseas shareholding limit in HDFC Bank.
The meeting of senior officials of the department of economic affairs and the DIPP would examine the bank’s proposal and decide on whether the 22.64% stake of parent entity HDFC Ltd is foreign investment or not, sources said.
According to sources, 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.
HDFC Ltd, which is 75.71% owned by foreign institutional investors (FIIs), and associate companies, holds 22.64% in HDFC Bank. Their investments in HDFC Bank were made before 2009, when the government came out with norms to calculate the level of foreign investment in companies.
“Downstream investment by HDFC Ltd prior to 2009 in HDFC Bank would be deemed as FDI in case there is any change in the shareholding pattern after the cut-off year," they said.
Last week, Foreign Investment Promotion Board (FIPB) did not take up HDFC Bank’s proposal.
HDFC Bank had approached the FIPB in the latter half of 2013 to increase the foreign holding in the bank to 67.55% from 49%.