The Union Cabinet on Wednesday approved foreign direct investment (FDI) worthÂ Rs 24,000 crore for HDFC Bank.
This is including the premium, over and above the previous approved limit of Rs 10,000 crore, such that the composite foreign shareholding in the bank shall not exceed 74 percent of the enhanced paid-up equity share capital of the bank, said Finance Minister Piyush Goyal after the Cabinet meeting, which was chaired by Prime Minister Narendra Modi.
With the raising of this capital, FDI in the bank would hit the regulatory ceiling of 74 percent.
The second largest private bank had sought approval for maintaining the permissible foreign holding in the bank up to 74 percent of its total paid-up capital, out of which the FII (foreign institutional investors) sub-limit would be 49 percent and the balance 25 percent would be FDI.
Of the additional Rs 24,000 crore, Rs 8,500 crore is proposed to be allotted to the bankâ€™s promoter HDFC Ltd, on a preferential basis.
In December, the bankâ€™s board of directors of HDFC Bank approved a proposal to raise Rs 24,000 crore through a mix of instruments.
â€œGrowth is always required and being a large bank we need to raise capital. The capital should suffice for the next 5 years at least,â€� a senior HDFC Bank official had said after the announcement.
The fund raising planÂ â€” the largest by an Indian companyÂ â€” comes against the backdrop of strong growth in the bankâ€™s balance sheet over the last two years and an expectation that credit demand will revive as the economy stabilises.