The Indian government is holding inter-ministerial talks to raise the cap on foreign direct investment in state-run banks from 20% to 49%, India’s Financial Services Secretary M. Nagaraju told reporters on Monday.
Foreign interest in India’s banking industry is growing, as evidenced by, for example, the $3 billion purchase of a 60% stake in private RBL Bank by Dubai-based Emirates NBD.
Currently, India allows 74% foreign investment in private banks, but shareholding by a single foreign institution is limited to 15% unless the Reserve Bank of India grants an exemption.
Nagaraju said the Asian country plans to more than double the current limit on foreign direct investment in state-owned banks. Raising foreign ownership limits will help foreigners obtain more capital in the coming years, Reuters reported last year.
Separately, India’s state-run banks plan to launch qualified institutional equity issues (QIPs) worth about 500 billion rupees ($5.46 billion) in the 2026-27 financial year (April-March), higher than the 450 billion rupees planned for this fiscal year, Nagaraju said.
He spoke to reporters in New Delhi a day after Finance Minister Nirmala Sitharaman presented the country’s annual budget.
He added that New Delhi may launch a proposal to sell some of its stake in insurance giant Life Insurance Corporation next year.
The Indian government will also receive financial bids for IDBI Bank this month, Nagaraju said.
The government, which holds a 45.48% stake in IDBI Bank, and state-owned LIC, which holds a 49.24% stake, together plan to sell 60.7% of the lender. IDBI Bank had to be rescued by the state-run insurance company in 2019 following a spike in bad loans at the lender.
(1 dollar = 91.6350 Indian rupees) (Reporting: Nikunj Ohri; Writing Tanvi Mehta; Editing: Sonali Paul and Raju Gopalakrishnan)
