FDI: Private banks get a leg up - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

FDI: Private banks get a leg up

Mar 1, 2003

In a key development, Finance Minister Jaswant Singh has proposed a hike in Foreign Direct Invesment (FDI) limit of private (and foreign) banks from the current 49% to 74%. The move is aimed at encouraging foreign strategic investment in the Indian banking sector. A snapshot of the shareholding structure of some of the top private sector banks reveals that presently none of these banks have even 49% foreign stakeholders. The 44% stake of Bank Brussels Lambert in ING Vysya Bank is the highest FDI stake in any private sector bank. So why would the FDI suddenly start flowing in the sector, if they have not even utilised the existing norms.

Bank Name Foreign Partners* FIIs
H D F C Bank Ltd. 11.6 18.6
I C I C I Bank Ltd.** - 37.2
I N G Vysya Bank Ltd. 44.0 5.6
United Western Bank Ltd. - 0.0
Federal Bank Ltd. - 1.4
U T I Bank Ltd. - 9.3
I D B I Bank Ltd. - 1.4
Global Trust Bank Ltd. 20.9 0.3
Indusind Bank Ltd. 25.0 0.0
Karur Vysya Bank Ltd. - 0.6
Centurion Bank Ltd. 17.7 19.6
Vysya Bank 19.4 6.7
* As per the latest company release
**ICICI Bank has not indicated clearly on the foreign collaboration.
However, at one time, it did sell a 4.9% stake to Prudential

The reason is simple. A 74% stake gives foreign partners the crucial management control in India's banking sector. Till date, a lot of foreign banks have shied away from acquiring stakes in key Indian banks due to the FDI restrictions. Post the easing of these norms, it is likely that the private banking sector may see a lot of M&As or strategic investments going forward. This consolidation in the industry will prove beneficial for the sector in the long term owing to the technological inputs these strategic partners will bring.

On that note, please look at the above list carefully, for you may find some of these very names getting acquired by foreign banking majors in the times to come. So in that sense, it is a good investment opportunity. However, before taking the plunge, make sure that the fundamentals of the bank you are looking at are rock solid, for it is the most efficient banks that will see foreign suitors lining up.


Equitymaster requests your view! Post a comment on "FDI: Private banks get a leg up ". Click here!

  

More Views on News

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

3 Rebirth of India Opportunities Are Racing Ahead in These Gloomy Times... (Views On News)

Jun 28, 2019

Tanushree Banerjee shares an update on the Rebirth of India and reveals her top 3 trends...

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS