No changes in FDI norms for banking sector, says RBI governor Sanjay Malhotra

Sanjay Malhotra, Governor, Reserve Bank of India

The Reserve Bank of India governor Sanjay Malhotra has ruled out any changes to foreign direct investment (FDI) limits in the banking sector.

Speaking at the post-monetary policy committee (MPC) briefing on June 6, Malhotra said FDI norms, allowing up to 74 percent foreign investment in banks, with 49 percent permitted through the automatic route, remain unchanged.

The comments come after a section of media claimed that India was considering easing foreign ownership rules.

Malhotra said non-resident ownership in banks is allowed up to 15 percent, with any proposals for higher limits to be considered on a case-by-case basis.

While the central bank is reviewing the overall ownership framework in the banking system, the governor said changes, if any, would be part of a longer-term process and not immediate.

The issue also came into focus after Yes Bank on May 9 announced that Sumitomo Mitsui Banking Corporation (SMBC) would acquire a 20 percent stake from its stakeholders.

The sellers would include State Bank of India and other major lenders such as HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank — all of whom were part of Yes Bank’s rescue consortium in 2020.

SBI will offload its 13.19 percent stake for nearly Rs 8,890 crore, while the remaining lenders will divest a combined 6.81 percent, enabling SMBC to reach a 20 percent holding in the bank.

Earlier this week, Yes Bank board approved fundraising plan of Rs 16,000 crore through a combination of debt and equity issuances.

The RBI cut the repo rate by 50 basis points to 5.5 percent, the third consecutive cut since February, as part of efforts to stimulate economic growth.