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Overall foreign equity limit in banks raised to 40 per cent

The Indian government made an important change in the pattern of foreign funding of private sector banks.

The government decided that in the case of a shortfall in non-resident Indian contributions up to the permissible levy of 40 per cent in private sector banks, multilateral financial institutions would be allowed to contribute foreign equity to the extent of the shortfall in NRI contributions. This would be within the overall limit of 40 per cent.

Under the existing policy, foreign direct investment in private sector banks up to 20 per cent by foreign banking companies or finance companies, including multilateral financial as technical collaborators or co-promoters, is permissible. Under this policy, NRIs are also allowed equity participation in private sector banks up to 40 per cent, which would be inclusive of equity participation by other foreign investors.

UNI