NEW DELHI: The government approved on Wednesday HDFC Bank’s proposal to raise additional capital of Rs 24,000 crore by selling shares to foreign investors to finance its commercial growth.
This includes the premium, beyond the previous approved limit of Rs 10,000 crore, that the compound foreign participation in the bank should not exceed 74 percent of the bank’s improved capital stock, said Minister of Finance Piyush Goyal after the Meeting of the Cabinet chaired by Prime Minister Narendra Modi.
With the collection of this capital, FDI in the bank will reach the maximum regulatory limit of 74 percent, he said.
Currently, FDI in banks stands at 72.62 percent.
According to the RBI guidelines, foreign holdings in public sector banks in India can not go beyond 74 percent.
“The decision would ensure that the compound foreign participation in the bank, including all types of foreign investments, both direct and indirect, will not exceed 74 percent of the bank’s enhanced enhanced share capital,” the minister said.
It will be subject to the conditions of the Foreign Direct Investment Policy and other regulations or sectoral guidelines.
The proposed investment is expected to strengthen the capital adequacy ratio of the bank, he said.
Of the additional Rs 24,000 crore, it is proposed to allocate Rs 8,500 crore to HDFC Ltd, the bank’s developer, on a preferential basis.
The remaining amount will be raised through the issuance of shares of capital or convertible securities or deposit receipts in accordance with a Placement of Qualified Institutions, said HDFC Bank.
It should be noted that the Council of Ministers in 2015 approved a proposal from the HDFC Bank to raise Rs 10,000 crore from foreign investors.