Foreign Direct Investment in Indian Bank


Indian federal government has  opened up the banking sector for foreign investors raising the ceiling of foreign direct investment in the Indian private sector banks to 49 percent. However, the ceiling of FDI in the country's public sector banks remains unchanged at 20 percent. Foreign banks having branches in India are also entitled to acquire stakes upto 49% through "automatic routes". It is to be noted that  under "automatic route" fresh shares would not be issued  to  foreign investors who already have  financial or technical collaboration  in banking or allied sector. They would require FIPB approval. However, some statutory approvals of the Reserve Bank of India (RBI), country's central banking authority, would be required. There are 29 Indian private sector banks. RBI  has also specified the voting rights of foreign investors. The scope for disinvestment is also there.

STATUTORY LIMITS

  • Foreign direct investment (FDI)  up to 49 percent is permitted in Indian private sector banks  under "automatic route" which includes Initial Public Issue (IPO), Private Placements, ADR/GDRs; and Acquisition of shares from existing shareholders.

  • Automatic route is not applicable to transfer of  existing shares in a banking company from residents to non-residents. This category of investors require approval of FIPB, followed by "in principle" approval by Exchange Control Department  (ECD), Reserve Bank of India (RBI).

  • The "fair price" for transfer of existing shares is determined by RBI, broadly on the basis of Securities Exchange Board of India (SEBI) guidelines for listed shares and erstwhile CCI guidelines for unlisted shares. After receipt of "in principle" approval, the resident seller can receive funds and apply to ECD, RBI, for obtaining final permission for transfer of shares.

  • Foreign banks having branch-presence in India are eligible for FDI  in private sector banks subject to the overall cap of 49% with RBI approval.

  • Issue of fresh shares under automatic route is not available to those foreign investors who have a financial or technical collaboration in the same or allied field. Those who fall under this category would require Foreign Investment Promotion Board (FIPB) approval  for FDI in the Indian banking sector.

  • Under the Insurance Act, the maximum foreign investment in an insurance company has been fixed at 26 percent. Application for foreign investment in banks  which have joint venture/subsidiary in insurance sector should be made to RBI. Such applications would be considered by RBI  in consultation with Insurance regulatory and Development Authority (IRDA).

  • FDI and Portfolio Investment  in nationalised banks are subject to overall statutory limits of 20 percent.

  • The 20 percent ceiling would apply  in respect of such investments in State Bank of India and its associate banks.

VOTING RIGHTS OF FOREIGN INVESTORS

Private Sector  Banks : Not more then 10 percent of the total voting rights of all the shareholders
Nationalised Banks : Not more than 1 percent of the total voting rights of all the shareholders  of the nationalised bank.
State Bank of India : Not more than 10 percent  of the issued capital. This does not apply to Reserve Bank of India (RBI) as a shareholder. However, government in consultation with RBI, ceiling for foreign investors can be raised.
SBI Associates : Not more than 1 percent. This ceiling will not be applied to State Bank of India. If any person holds more than 200 shares, he/she will not be registered as a shareholder.

RBI APPROVAL

  • Transfer of shares of 5 percent and more of the paid-up capital of a private sector bank requires prior acknowledgement of RBI. 
  • For FDI of 5 percent and more of the paid-up capital, the private sector bank has to apply in the prescribed form to RBI.
  • Under the provision of Foreign Exchange Management Act (FEMA), 1999, any fresh issue of shares of a bank , either through the automatic route or with the specific approval of FIPB, does not require further approval of Exchange Control department (ECD) RBI from the exchange control angle.
  • The Indian banking company is only required to undertake two-stage reporting to the ECD  of RBI as follows: (1) the Indian company has to submit a report within 30 days of the date of receipt of amount of consideration indicating the name and address of foreign investors, date of receipt of funds and their rupee equivalent, name of bank through whom funds were received and details of govt. approval, if any. (2) Indian banking company  is required to file within 30 days from the date of issue of shares, a report in form FC-GPR (Annexure II) together with a cretificate from the company secretary of the concerned company certifying that various regulations have been complied with. The report will also be accompanied by a certificate from a Chartered Account indicating the manner the manner of arriving at the price of the shares issued.


    DIVESTMENT BY FOREIGN INVESTORS
  • Sale of shares by non-residents on a stock exchange and remittance of the proceeds thereof through an authorised dealer does not require RBI approval.
  • Sale of shares by private arrangement requires RBI's prior approval.

Private Sector Banks in India

Indian Private Sector  Banks Telephone/E-mail Address/Website
Bharat Overseas Bank Ltd.
Habeeb Towers
756  Anna Salai
Chennai- 600 002
044-852 2983
bobl@md3.vsnl.net.in
Bank of Punjab Ltd.
SCO 46-47 Bank of Punjab Square
Sector 9D
Chandigarh- 160 017
0172-74 1196/3892/1784
bopcr@bankofpunjab.com
www.bankofpunjab.com
Centurion Bank Ltd.
1201, Raheja Centre
Nariman Point
Mumbai- 400 021
022- 2047234/2047238 
www.centurionbank.com
City Union Bank Ltd.
149 TSR (Big) Street
Kumbakonam- 612 001
Tanjore
Tamil Nadu
0435-43 2322
cubco@md3.vsnl.net.in
www.cityunion.com

Development Credit Bank Ltd.
204, Raheja Centre
Nariman Point
Mumbai- 400 021
022-287 2465/282 5689/ 285 1103
sitholey@bom3.vsnl.net.in
www.dcbl.com
Global Trust Bank Ltd.
303-48-3, Sardar Patel Road
Secunderabad- 500 003
040-781 9333 
ask@globaltrustbank.com 
www.globaltrustbank.com
The Bank of Rajasthan Ltd.
C-3 Sardar Patel Marg
Jaipur- 302 001
0141- 38 1222/1223 
borit@jp1.dot.net.in
www.bankofrajasthan.com
The Benares State Bank Ltd.
S-20/52 AK Varuna Bridge Cantonment
Varanasi- 221 002
0542- 34 8681/8682
benbank@nde.vsnl.net.in

The Dhanalakshmi Bank Ltd.
Dhanalakshmi Building
The Round
Trichur- 680 001
0487- 33 5177/
dhanam@sancharnet.in
www.dhanbank.com
The Federal Bank Ltd.
Federal Towers
Aluva- 683 101
0484- 62 3620-29
chsec@federalbank.com
www.federalbank.com
The Ganesh Bank of Kurundwad Ltd.
Laxmi Road, Near Jain Basti
Taluka Shirol
Kurundwad
Kohlapur- 416 106
02322- 44213
The HDFC Bank Ltd.
Sandoz House
Dr Annie Besant Road
Worli
Mumbai- 400 018
022- 495 1771
aditya.puri@hdfcbank.com
www.hdfcbank.com
The Jammu and Kshmir Bank Ltd.
Zum Zum Building
Rambagh
Srinagar- 190 015
0194- 43 0040/0730/5237/5236
mykhan@jkbmail.com
www.jammuandkashmirbank.com
The Karnataka Bank Ltd.
Kodialbali
Mangalore- 575 003
0824- 44 0751
ktkbank@blr.vsnl.net.in
www.bnetal.com / www.karnataka.com
The Karur Vysya Bank Ltd.
Erode Road
Karur- 639 001
04324- 3 2520/5521-25
kvbcocs@md3.vsnl.net.in
www.kvb.co.in
The Laksmi Vilas Bank Ltd.
Salem Road
Kathaparai
Karur- 639 006
04324- 2 0051-60
lvb@md3.vsnl.net.in
The Nainital  Bank Ltd.
Naini Bank House
Seven Oaks, Mallital
Nainital- 263 001
 
05942- 36195/6138
ICICI Bank Ltd.
ICICI Towers, 4th Floor
South Tower
Bandra Kurla Complex, Bandra (East)
Mumbai- 400 051
 022- 6531414
sinorhn@icicibank.com
www.icicibank.com

IDBI Bank Ltd.
Nariman Bhavan, 12th Floor
VK Shah Marg
Nariman Point
Mumbai- 400 021
022- 284 4473
d mukerjee@idbibank.com
www.idbibank.com
IndusInd Bank Ltd.
IndusInd House
425, Dadasaheb Bhadkamkar Marg
Mumbai- 400 004
022- 385 7474/9901-99
www.indusind.com
Lord Krishna Bank Ltd.
Indian Express Building
Kaloor
Kochi- 682 017
0484- 40 3567/68/70/1269
ao@lordsbank.com
www.lordsbank.com
SBI Commercial and International Bank Ltd.
Maker Chambers III
Nariman Point
Mumbai- 400 021
022- 284 1091
mumsbici@bom3.vsnl.net.in
www.sbici.com
Tamilnad Mercantile Bank Ltd.
57, VE Road
Tutocorin- 628 002
0461- 32 5381/5831
tmbankhi@md3.vsnl.net.in
The Nedungadi Bank Ltd.
Satabdi Bhavan
Mini Bye Pass Road
National Highway
Calicut- 673 001
0495- 7- 3661/4662/3663/4664
nblcmsec@md3.vsnl.net.in
nedungadi-bank.com
The Ratnakar Bank Ltd.
179-B, Shahu Market Yard, 'E' Ward
Kolhapur- 416 005
0231- 65 7386
ratnbank@bom5.vsnl.net.in

The Sangli Bank Ltd.
Rajwada Chowk
Sangli- 416 416
0233- 37 3611-15
sanbank@pn3.vsnl.net.in
The South Indian Bank Ltd.
SIB House
Mission Quarters, PO Box No. 28
Thrissur- 680 001
0487- 42 0020/4101
sibtrho@md2.vsnl.net.in
www.southindianbank.com
The United Western Bank Ltd.
172/4 Raviwar Peth
Shivaji Circle
Satara- 415 001
02162- 3 1722/23
uwb@uwbankindia.com
www.uwbankindia.com
The Vysya Bank Ltd.
72, St. Mark's Road
Bangalore- 560 001
080- 227 2021
krr.moorthy@gnblr.global.net.ems.vsnl.net.in
UTI Bank Ltd.
Maker Towers F , 13th Floor
Cuffe Parade
Mumbai- 400 005
022- 218 9106/9109
co@utibank.co.in
www.utibank.co.in