The Union government is holding talks to increase foreign investment limits in private sector banks to 100%, from 74% at present. It is also considering a hike in the foreign investment cap for public sector banks (PSBs), from 20% to 49%.
According to the government’s policy, foreign investors — foreign direct investment, foreign institutional investors, and non-resident Indians combined — can invest up to 74% of paid-up capital in private sector banks. Up to 49% foreign investment is allowed under the automatic route; such investments between 49% and 74% require the government’s approbation under the present norms. This is, however, not the first time that the government is exploring a proposal to increase foreign investment limits to 100% in private banks. The RBI had in 2015 reportedly raised objections over the Union government’s proposal to increase the limit to 100% for private sector banks due to “regulatory problems”.
[Source: The Business Standard]