Temasek, GIC get nod to up stake in ICICI Bank

Singapore government-promoted Temasek and the Government of Singapore Investment Corporation can increase their holding in the country's largest bank, ICICI Bank, to 10 per cent each.

"The Reserve Bank of India (RBI) has agreed to treat the two investment arms of the Singapore government as separate entities only for the purpose of their investments in ICICI Bank," said an RBI spokesperson.

This approval comes at a time when ICICI Bank is in the market to raise Rs 8,750 crore, with a greenshoe option of Rs 1,312.50 crore, through a follow-on equity issue.

Though the RBI has made an exception, both the entities will have to approach the RBI for specific approval after they buy shares of the bank in the FPO.

Sources say Temasek and GIC are expected to pick up around Rs 2,000 crore worth shares in the offer. This is a one-off arrangement the RBI has agreed to under the Comprehensive Economic Co-operation Agreement (CECA).

At present, Allamanda Investments Pte Ltd (an affiliate of Temasek) holds 7.3 per cent, while the Singapore government holds 2.24 per cent in the bank.

The Singapore government has always maintained that Temasek and GIC are two separate entities and have separate boards. GIC is a global investment management company established in 1981 to manage Singapore's foreign reserves. Its investments are in longer term and high yielding assets.

Temasek is a financial investor, which invests in high yielding assets.

The RBI had not permitted the Singaporean entities to invest in the ICICI Bank issue in 2005. This had not gone very well with Singapore and the qualified full bank (QFB) status licence of both ICICI Bank and State Bank of India got stuck with the Monetary Authority of Singapore.

Bankers are of the opinion that the RBI exception is not expected to go down well with other foreign institutional investors as the RBI has capped the single entity holding in a bank at 10 per cent.