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20 per cent foreign equity in private banks okayed

The government has decided that foreign investors (including multilateral institutions) will be allowed foreign equity participation in the private sector banks upto 20 per cent but in cases of shortfall in foreign equity contributions by NRIs, multilateral institutions would be allowed to contribute foreign equity to the extent of the short fall.

This has been done in view of request from institutions that the unsubscribed portion of the non-resident Indian foreign equity contribution maybe allowed to be subscribed by other investors.

As of now, the existing guidelines for foreign equity investment in the private sector banks provide that foreign banking companies or finance companies, including multilateral financial institutions, are allowed foreign equity participation upto 20 per cent as technical collaborator or co-promoters. NRIs are allowed equity participation in private sector banks upto 40 per cent, inclusive of equity participation by other foreign investors.

UNI