Updated: December 25, 2009 23:00 IST

Efforts to remove anomalies in banking FDI

Special Correspondent
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A file photo of Union Minister of Commerce and Industry Anand Sharma
A file photo of Union Minister of Commerce and Industry Anand Sharma

The Union Government will soon remove the ambiguity concerning change in the national status of leading lenders like ICICI Bank and HDFC Bank following the revised FDI guidelines issued in February.

“The issue of change in the national status is under active discussion among the finance, commerce and industry ministries and the Reserve Bank of India. A final view to remove any ambiguity will be taken very soon,” Commerce and Industry Minister Anand Sharma said. Following changes in the guidelines for computation of FDI, it was feared that leading private banks such as ICICI Bank, HDFC Bank, Yes Bank, IndusInd Bank, Federal Bank and ING Vyasya would become foreign entities.

In the revised norms, it is envisaged that FDI will include stakes held by NRIs, American and global depository receipts, foreign currency convertible bonds and convertible preference shares. As the change in the national status of an entity can have consequences on its investment in sectors which have FDI ceiling like insurance, the banks took up the issue with the RBI and Government and sought clarification. The Department of Industrial Policy and Promotion had issued Press notes 2 and 3, dealing with calculations of foreign investment in a company and investment in downstream entities. These notes have replaced the conventional proportionate method of computing FDI by the parameter of beneficial ownership and control of entities at each stage of investment.

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