Mumbai: The Reserve Bank of India on Wednesday said overall foreign investment ceiling in Equitas Holdings, which bagged an in-principle approval for a small finance bank, should not go beyond 49 per cent.
Chennai-based Equitas Holdings is one of the 10 entities that received in-principle approval from the RBI in September last to set up small finance banks.
Foreign shareholding in small finance banks would be as per the FDI policy for private sector banks, according to the RBI’s guidelines for the sector.
With regard to monitoring of foreign investment under Portfolio Investment Scheme (PIS) in Indian companies, RBI in a release said the aggregate investment ceiling in Equitas Holdings for foreign institutional investors (FIIs)/foreign portfolio investors (FPIs) under the Portfolio Investment Scheme shall remain at 24 per cent.
For non-resident Indians (NRI), it should be at 10 per cent and the total foreign investment from all sources shall not exceed 49 per cent, the release said.
“The Reserve Bank has notified this under FEMA 2000,” the release said.
According to data available on Equitas Holdings’ website, shareholding by foreign companies/bodies/DFIs stood at 93 per cent (equivalent to 250,058,652 shares) as on March 31, 2015.
As per regulatory requirements, the companies that received in-principle approvals from the RBI to become small finance banks would need to off-load foreign shareholding to the extent the Indian laws allow.
Indian laws permits up to 74 per cent foreign investment in private sector banks of the country.
The RBI notification to Equitas Holdings was issued under the Foreign Exchange Management Act (FEMA) Regulations, 2000.
Equitas Holdings provides credit to small business units, small and marginal farmers, micro and small industries and other unorganised sector entities, through high technology-low cost operations.