Foreign Equity Norms For Pvt Banks Changed

The finance ministry has altered the foreign investment guidelines governing private sector banks and permitted multilateral institutions like the World Bank and the Asian Development Bank to acquire a larger stake _ going upto 20 per cent of the paid-up capital.

An official release issued by the ministry states that at present the foreign investment norms allow foreign investment upto 40 per cent _ consisting of 20 per cent for the foreign investor and the balance for non-resident Indians (NRIs)

It has now said that if a bank fails to raise the permissible level (20 per cent) of NRI investments, multilateral institutions would be allowed to make up the shortfall in equity contributions.

The decision has been taken in the light of the fact that in a few cases, the promoters of private banks were unable to raise the required equity allotted to NRIs, leaving a portion of the foreign equity unsubscribed.

"Requests have been made that the unsubscribed portion of the NRI foreign equity contribution may be allowed to be subscribed by other investors," the release said.