Government’s FDI policy may be reviewed; ICICI Bank seeks clarification
The government's new foreign direct investment (FDI) rules which, according to the banking sector, are rather ambiguous might likely be reviewed. The Reserve Bank of India (RBI) had recently raised issues concerning the rules, and other banks too are awaiting clarity of the new policy.
As per the FDI guidelines given, the ownership of India's biggest private lender ICICI Bank would need to undergo a change - they would have to substitute their 'resident entities' status with a non-resident entities status.
The gist of the government's new FDI policy is that in case an indirect FDI in an Indian company goes beyond 50 percent, the company's investment in its subsidiaries will be considered a foreign investment.
In addition, the calculation of the indirect foreign investment in an Indian entity would also be based on a few other factors, like the sum total of FDI; the Non-Resident Indians' stake; American and global depository Receipts; foreign currency convertible bonds; and convertible preference shares.
Though the policy has a bearing on the status of ICICI Bank and HDFC Bank, among others, the government stance is not clear enough. In this regard, Chanda Kochhar, the ICICI Bank Joint Managing Director, said: "Nothing has changed in ownership; we continue to be with same ownership for years. We are awaiting clarification of issues regarding foreign bank status."