Cabinet clears HDFC pitch to raise Rs 24,000 crore via FDI

This includes premium, over and above the previous approved limit of Rs 10,000 crore, that the composite foreign shareholding in the bank should not exceed 74 per cent of the enhanced paid-up equity share capital of the bank, Finance Minister Piyush Goyal said after the Cabinet meeting chaired by Prime Minister Narendra Modi. 

With the raising of this capital, FDI in the bank will hit the regulatory ceiling of 74 per cent, he said. Currently, the FDI in the banks stands at 72.62 per cent. As per the RBI guidelines, foreign holding in public sector banks in India cannot go beyond 74 per cent. 

“The decision would ensure that the composite foreign shareholding in the bank inclusive of all types of foreign investments, both direct and indirect, will not exceed 74 per cent of the enhanced paid-up equity share capital of the bank,” the minister said. 

It will be subject to Foreign Direct Investment Policy conditionalities and other sectoral regulations or guidelines. The proposed investment is expected to strengthen the capital adequacy ratio of the bank, he said. Of the additional Rs 24,000 crore, Rs 8,500 crore is proposed to be allotted to HDFC Ltd, the promoter of the bank, on a preferential basis. 

Remaining amount to be raised by issue of equity shares or convertible securities or depository receipts pursuant to a Qualified Institutions Placement, HDFC Bank had said. It is to be noted that the Cabinet in 2015 cleared a proposal of HDFC Bank to raise Rs 10,000 crore from foreign investors. 

Meanwhile, the Ministry of Corporate Affairs has started inspection of NuPower Renewables and five other companies linked to the ICICI Bank controversy, Union Minister PP Chaudhary said on Wednesday. 

Multiple agencies are probing the alleged lapses involving ICICI Bank’s MD and CEO Chanda Kochhar and her family members. The lender is also carrying out an independent probe into allegations of ‘conflict of interest’ and ‘quid pro quo’ in Kochhar’s dealing with certain borrowers. Chaudhary said the ministry ordered inspection under Section 206(5) of the Companies Act, 2013 on April 23, 2018 with respect to six companies linked to the ICICI Bank controversy. 

The inspection is with regard to “six companies, including the company namely NuPower Renewables Pvt Ltd and the matter is under progress,” he said. The minister of state for corporate affairs also said the Regional Director (Western Region) under the ministry is carrying out the inspection. 

Section 206 provides powers to call for information, inspect books and conduct inquiries. According to Section 206 (5), the central government may, if it is satisfied that the circumstances so warrant, direct inspection of books and papers of a company by an inspector appointed by it for the purpose.