The government on Friday said ICICI Bank and HDFC Bank cannot be called Indian-owned banks after a debate over the nationality of India’s top two private sector lenders.
“At best, the two can be called as Indian-controlled banks,” said R P Singh, secretary of Department of Industrial Policy and Promotion, who had been asked by the two banks to clarify the matter.
“ICICI Bank Managing Director and CEO (Chanda Kochhar) met me day before yesterday (Wednesday), she has discussed (the issue) with me,” he said.
ICICI Bank had maintained that it continues to be an Indian bank as its management and board was Indian.
However, both ICICI Bank and HDFC Bank’s have over 74 per cent foreign holding, including that of foreign banks and overseas institutional investors.
“Banks will be covered in one paper, which we are trying to bring out on the financial aspects totally–it will cover banks also,” said Singh, referring to the six discussion papers on FDI that his department is planning to bring out soon.
“You know the definition of what is a company controlled by Indians and what is the definition of a company owned by Indians.”
By that definition, they are certainly banks which are not owned by Indians, because equity of at least 74 per cent or around 74 per cent is from outside.
But they can be construed as banks controlled by Indians if the majority of directors are Indians and right to directorship is with Indians. So depending upon that they are construed as banks controlled by India, but they can certainly not be called banks owned by Indians.
“There is a way of resolving their problem. We will try to find a solution for that. The handicap they are suffering, we will try to resolve,” Singh said.
The banks’ claim that they are Indian is significant in the light of the government announcing new FDI norms last year that say if indirect FDI in an Indian company exceeds 50 per cent, its investment in subsidiaries will be treated as foreign investment.
Moreover, in calculating indirect foreign investment in an Indian entity, the sum total of FDI, stake from Non-Resident Indians, American and global depository Receipts, foreign currency convertible bonds and convertible preference shares will be taken into account.
Both ICICI and HDFC Bank have insurance ventures, where FDI is capped at 26 per cent.

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