The long-pending issue of raising FDI limit in HDFC bank has received a clearance from the Cabinet Committee on Economic Affairs (CCEA) on Wednesday. As part of the approval, the bank can now have foreign shareholding up to 74% as against the current 72.62%.
The centre has given the clearance to the lender to raise an additional share capital of as much as Rs. 24,000 crore, including the premium amount, over and above the previously approved Rs. 10,000 crore limit, in a way that the combined foreign shareholding does not go beyond the threshold of 74% of the increased paid-up equity.
On the Cabinet's nod, Piyush Goyal, interim Finance Minister said, "The proposed investment is expected to strengthen the capital adequacy ratio of the bank". The increased capital base will be put to improve and augment both the physical as well as digital banking services of the leading private sector bank.
After the changes to the FDI scheme were implemented in August 2017, private sector bankers are allowed foreign direct investment up to a limit of 74%. Any investment up to the extent of 49% can be via the automatic route and anything over and above this limit needs an approval from the government.
The limit of 74% FDI includes investment under the PIS by NRIs, FII or FPIs as well as share acquisition before September 2003 by former OCBs. At the same time, it also includes private placements, GDR/ADR, IPOs, share acquisitions from existing shareholders.