The government on Wednesday approved the proposal of HDFC Bank to raise an additional capital of Rs 24,000 crore by selling equity to foreign investors to fund its business growth.
With the raising of this capital, foreign direct investment (FDI) in the bank will hit the regulatory ceiling of 74 per cent. At present, the FDI in the bank stands at 72.62 per cent. As per the RBI guidelines, foreign holding in public sector banks cannot go beyond 74 per cent.
Shares of HDFC Bank closed nearly 0.46 per cent lower at Rs 2,035.25 apiece on BSE on Wednesday. The cabinet approval came after the close of market hours.
“The decision would ensure that the composite foreign shareholding in the bank inclusive of all types of foreign investments, both direct and indirect, will not exceed 74 per cent of the enhanced paid-up equity share capital of the bank,” said finance minister Piyush Goyal after the prime minister Narendra Modi chaired cabinet meeting which cleared the proposal.
The approval will, however, be subject to FDI policy conditions and other sectoral regulations or guidelines.
The proposed investment is expected to strengthen the capital adequacy ratio of the bank, he said.