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FIPB approves 74% foreign holding in HDFC Bank

FIPB has regularised the bank’s existing shareholding which includes nearly 74 percent foreign holding in the bank. However, this might attract some penalty for HDFC Bank.

Private sector lender  HDFC Bank has finally received the much-awaited Foreign Investment Promotion Board’s (FIPB) approval for its foreign direct investment proposal.

CNBC-TV18 learns from sources that FIPB has regularised the bank’s existing shareholding which includes nearly 74 percent foreign holding in the bank. However, this might attract some penalty for HDFC Bank. Sources add that issues relating to compounding on FDI breach and penal interest will be decided by the Reserve Bank of India (RBI).

As per the existing norms, foreign holding in a bank cannot exceed 74 percent.

HDFC Bank had approached the FIPB last year for increasing the foreign holding in the bank to 67.55 percent from 49 percent. But parent HDFC Ltd ‘s share holding of 22.56 percent stake in HDFC Bank remained a bone of contention since it was considered to be FDI by Finance and Industry ministry. Hence the proposal was not cleared by the FIPB then. Earlier this year HDFC Bank reapproached the FIPB with a revised proposal seeking to raise its foreign holding ceiling to 74 percent, from 67.55 percent proposed earlier.

Sources further add that the FIPB considers HDFC’s stake in HDFC Bank as foreign investment.

Meanwhile, 14 other FDI proposals including that of pharma company  Sanofi and Punj Llyod ‘s proposal to enter into defence space was cleared by the FIPB in today’s meeting.

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