ICICI, HDFC violate foreign investment rules

India's commerce and industry minister said decision meant to force lenders to shore up domestic shareholding.

ICICI Bank and HDFC Bank are in violation of the foreign investment norms, the commerce and industry ministry said on Tuesday.

The stand of the ministry, which governs foreign investments in India, could be the first of the steps that forces the two banks to increase their domestic shareholding, sources said.

Commerce and industry minister Anand Sharma said no changes would be made to foreign investment rules specifically for the banking and financial sector, three days after R P Singh, secretary, the Department of Industrial Policy and Planning within the ministry, hinted at a compromise to solve the problem.

"We are not going to revisit the foreign direct investment (FDI) norms for banks," Sharma categorically replied when asked on the compromise talk.

"Ownership and control ... have been defined with clarity, calculation of FDI is also much simpler. The policy has worked well," Sharma said.

View the full story in DNA India.