New Delhi: ICICI Bank has asked the
government not to take into account overseas securities like
ADR and GDR when deciding on whether a bank is Indian or
foreign.
Suggesting that the Department of Industrial Policy and
Promotion (DIPP) should make a clarification on the issue of
foreign holding in a bank, an issue on which ICICI Bank's
status depends, its CEO and managing director Chanda Kochhar
said, "We are an India bank and we are proud of it."
Earlier this year, DIPP issued new foreign investment
guidelines, under which a company's status would change from
'resident' to 'non-resident' Indian, if it has more than 50
percent of indirect foreign investment, which would be
sum-total of stake held through ADRs/GDRs, FDI, NRI holding as
also foreign currency convertible bonds and shares.
ICICI Bank has little over 51 percent of stake held by
foreign institutional investors (FIIs), but it includes 29.07
percent held through ADRs alone -- thus changing its status
to foreign bank as per the new guidelines, which are being
debated among the regulators, authorities and companies.
"We have written to the Department of Industrial Policy
and Promotion and have given our logic. It is important to
clarify... We have not received a written response but they
are clearly working on addressing the concerns," Kochhar said.
Though she did not elaborate on what her communication to
the government was, Kochhar said, "If you look at it (overseas
securities) logically, while one can look at ownership and say
so much is foreign. But, really, the underlying management
control is in Indian hands because the ADR and GDR holders
give the voting powers in favour of the Board of the company."
The guidelines, in the absence of a clarification, would
render banks like ICICI Bank, HDFC and ING Vysya Bank as
foreign-owned entities with overseas holding rising to more
than 50 percent.
RBI and Finance Ministry are believed to have raised
their concerns in this regard with the Industry Ministry.
Kochhar noted that ICICI Bank is incorporated in India
and operating under Banking Regulations Act, she said, adding
the entire control in terms of every regulation that the bank
has to follow is all driven by Indian regulation and laws.
Pending clarification on whether there is a change in the
status of the bank, Kochhar said it does not affect day-to-day
operations.
"This will affect (operations only) if we were to invest
in a company which has certain FDI guidelines but in any case
we don't invest, because there are anyway limits on banks in
terms of how much equity and capital market exposure you can
take.
"So in a way its a theoretical constraint really. It does
not change day-to–day activities at all," she added.
Bureau Report
First Published: Wednesday, August 26, 2009, 14:34