ICICI Bank has asked the government not to take into account overseas securities like ADR (American Depositary Receipt) and GDR (Global Depositary Receipt) when deciding on whether a bank is Indian or foreign.
Suggesting that the Department of Industrial Policy and Promotion should make a clarification on the issue of foreign holding in a bank, an issue on which ICICI Bank's status depends, its CEO and managing director Chanda Kochhar said, "We are an India bank and we are proud of it."
Earlier this year, DIPP issued new foreign investment guidelines, under which a company's status would change from 'resident' to 'non-resident' Indian, if it has more than 50 per cent of indirect foreign investment, which would be sum-total of stake held through ADRs/GDRs, FDI (foreign direct investment), NRI (non-resident Indians) holding as also foreign currency convertible bonds and shares.
ICICI Bank has little over 51 per cent of stake held by foreign institutional investors, but it includes 29.07 per cent held through ADRs alone -- thus changing its status to foreign bank as per the new guidelines, which are being debated among the regulators, authorities and companies.
"We have written to the Department of Industrial Policy and Promotion and have given our logic. It is important to clarify... We have not received a written response but they are clearly working on addressing the concerns," Kochhar said.
Though she did not elaborate on what her communication to the government was, Kochhar said: "If you look at it (overseas securities) logically, while one can look at ownership and say so much is foreign. But, really, the underlying management control is in Indian hands because the ADR and GDR holders give the voting powers in favour of the Board of the company."
The guidelines, in the absence of a clarification, would render banks like ICICI Bank, HDFC and ING Vysya Bank as foreign-owned entities with overseas holding rising to more than 50 per cent.
RBI and the finance ministry are believed to have raised their concerns in this regard with the industry ministry.
Kochhar noted that ICICI Bank is incorporated in India and operating under Banking Regulations Act, she said, adding the entire control in terms of every regulation that the bank has to follow is all driven by Indian regulation and laws.
Pending clarification on whether there is a change in the status of the bank, Kochhar said it does not affect day-to-day operations.
"This will affect (operations only) if we were to invest in a company which has certain FDI guidelines but in any case we don't invest, because there are anyway limits on banks in terms of how much equity and capital market exposure you can take.
"So in a way it's a theoretical constraint really. It does not change day-today activities at all," she added.
