RBI caps HSBC stake in UTI Bank

The Reserve Bank of India (RBI) is understood to have formally told HSBC to cap its stake in UTI Bank at 10 per cent.

This is in keeping with the central bank's draft report on foreign banks, wherein it proposes that foreign banks having a presence in India cannot take more than 10 per cent stake in any private sector bank.

A spokesperson of HSBC said, "We have applied to the RBI seeking approval for the deal and are awaiting its approval."

HSBC seeks to pick up 20 per cent stake in UTI Bank in two stages. It entered into an agreement with Actis (formerly CDC) in December last year to acquire its 14.71 per cent holding in UTI Bank in the first stage but was waiting for the official nod from the RBI to close the deal. Reportedly, HSBC has till mid-June to close the deal with Actis.

HSBC has received necessary approval from other regulators including Foreign Investment Promotion Board (FIPB).

In addition, HSBC did not need to come out with an open offer since the Securities and Exchange Board of India (Sebi) felt that even with a 20 per cent stake in UTI Bank the foreign bank would not be in a position to call the shots as the voting rights have been capped at 10 per cent.

While the bank had earlier stated that the proposed stake in UTI Bank is purely a financial investment, Niall Booker, chief executive officer, HSBC, did not rule out acquiring management control "if circumstances change and the regulator agrees".