HDFC Bank gets approval from Cabinet for Rs.24,000 Crore FDI

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The Union Cabinet recently approved HDFC Bank’s proposal to raise an additional sum of Rs.24,000 crore as capital, including premium, more than Rs.10,000 crore, which was the the earlier approved limit, by selling equity shares to foreign investors.

HDFC-Bank
HDFC Bank receives approval from the Cabinet to raise Rs.24,000 crore via FDI.

This will ensure that the composite foreign shareholding in HDFC Bank, inclusive of both direct and indirect foreign investment, will not go over 74% of the enhanced paid-up equity share capital of the lender. In 2015, the Cabinet had cleared HDFC Bank’s proposal to raise a sum of Rs.10,000 crore from foreign investors.

By raising this capital, the foreign direct investment (FDI) in this private-sector bank will reach 74%, which is the regulatory limit. Currently, the foreign direct investment in HDFC Bank is at 72.62%. According to the guidelines set by the Reserve Bank of India (RBI), foreign investment in any public sector bank in the country should not be more than 74%. The investment should adhere to the conditions of the Foreign Direct Investment Policy and other guidelines and regulations.

It is expected that this investment will strengthen HDFC Bank’s capital adequacy ratio. Rs.8,500 crore out of the Rs.24,000 crore that will be raised shall be assigned to the promoter of HDFC Bank, which is HDFC Ltd. The lender has said that the remaining amount will be raised by issuing equity shares, depository receipts pursuant to a Qualified Institutions Placement, or convertible securities.

Shares of the private-sector lender have increased by around 0.25% after the bank received approval from the Union Cabinet to raise Rs.24,000 crore.

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