The Reserve Bank’s proposal to cap foreign investment in new banks below 50 per cent is aimed at maintaining the diversity of the Indian banking sector by avoiding a repeat instance of local banks losing their Indian -owned tag.
Recently, the country’s two leading private sector banks — ICICI Bank and HDFC Bank — lost their “Indian-owned” status, as foreign investment in them went over 50 per cent due to changes in the way foreign direct investment is calculated.
The government changed the way foreign direct investment is calculated and included ADRs, GDRs and convertible bonds in the category.
