HDFC Bank has received foreign investment promotion board’s (FIPB) approval to increase foreign investment to 74%. The approval ends the uncertainty over foreign investments in India’s most valuable bank and clears the decks for its proposed capital raising.
The bank may, however, have to pay a penalty for breaching the permitted foreign investment limit, which would be decided by the RBI. The FIPB has counted parent HDFC’s 22.5% stake in the bank as foreign investment, which means the total foreign holding in the bank is already close to the 74% limit in the sector. Effectively, the FIPB has only regularised the existing foreign investment in the bank and there's no room for further foreign investment.
