Private banks may be exempted from new FDI guidelines

NEW DELHI: Private sector banks like ICICI Bank, HDFC Bank and Vysya Bank may be kept outside the purview of the new FDI guidelines, with the Government addressing the RBI's concerns on the change of their status from 'resident' to 'foreign' if the norms are implemented.

"There is a probability that we will exempt these banks from the guidelines on the lines of the exemptions in the insurance sector," an official said.

With the changes in the FDI guidelines by the Department of Industrial Policy and Promotion, through a string of 'Press notes' in February, several private sector banks found that their status would change from 'resident' to 'non-resident'.

This was so because the total FDI will take into account the stakes held by Non-Resident Indians, American and global depository receipts, foreign currency convertible bonds and convertible preference shares.

Raising the issue with the Finance Ministry and DIPP, the RBI pointed out that as per the revised policy, foreign investment in all these banks would exceed 50 per cent in the new policy regime and they will be treated as non-resident entities.