HDFC Bank has decided to increase the foreign institutional investors' (FII) holding in the bank to 40 per cent. The bank, which had plans to push the FII limit to 30 per cent from the current 24 per cent, today amended the proposal at its seventh annual general meeting.
The bank had recently been included in the Morgan Stanley Capital Index (MSCI). Speaking at the AGM, Deepak M Stawalekar, HDFC Bank director, said: "The FII limit has been proposed to be raised to 40 per cent because of the changes in the MSCI."
Total foreign holding in HDFC Bank stands at 33 per cent (20 per cent with FIIs, non-resident Indians and overseas commercial borrowings, and 13 per cent through the foreign direct investment route).
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The bank will also bring down its capital market exposure by Rs 200-300 crore as per the new Reserve Bank of India (RBI) guidelines.
Banks have been told to cap their capital market exposure, including investments, to five per cent of advances. Banks have to submit a detailed plan to the RBI before June 15 in this regard.
HDFC Bank managing director Aditya Puri said, "As trading on the bourses has gone down, the exposure of the bank in the stock markets have also slipped. Also, we cannot close the guarantees before they run off their usual course. We will submit our proposal to the apex bank shortly."
Puri added that the bank's investment in capital markets were low. Most of the private sector banks had suffered losses from the Calcutta Stock Exchange crisis as guarantees of many of them were revoked.
Though HDFC Bank was an active player on the bourses, it was least affected. Out of the Rs 80 crore guarantees the CSE had revoked, HDFC Bank's share was Rs 5.4 crore.
"Total loss of the bank after taking into consideration the securities is Rs 1.9 crore. We have made more-than-adequate provisions for the same," said Puri.
"The loans were given to brokers on proportion of their trading, and also the average exposure of the bank per brokers was not more than Rs 4-5 crore," he added.