Private bank shares pile up smart gains on govt nod to raise foreign holding

Private bank shares advanced sharply on the bourses rising 1-4.5 percent each in the afternoon trade, after the government today said the composite foreign investment, including foreign direct investment and foreign institutional investment, can go up to 74 percent of the paid-up equity capital.

The decision is expected to aid YES Bank and Axis Bank where FII holdings is close to 49 percent, and the liberalisation of rules will enable them to raise additional equity capital.

At the end of December 2014, FII stake in YES Bank stood at 46.32 percent and that in Axis Bank was 48.52 percent.

However, lenders like ICICI Bank and HDFC Bank may not be able to raise fresh liquidity as foreign shareholding is already close to 74 percent in these banks, said analysts.

Further, another private lender Kotak Mahindra Bank also received the Foreign Investment Promotion Board (FIPB) approval for its proposal to increase foreign direct investment (FDI) in the bank to 55 percent.

Earlier, the bank’s proposal to raise FDI had come under scrutiny because of its decision to launch a general insurance venture for which rules stated that Indian insurance company must be ‘Indian owned and controlled’.

At 2.30 pm, BSE Bankex was the biggest sectoral gainer, rising nearly 2 percent at 22,012.89.

Among the gainers in the banking space, shares of Axis Bank jumped 4.6 percent to Rs 611.25, Kotak Bank advanced 3.8 percent to Rs 740.05, YES Bank moved up 3.7 percent to Rs 834.15, HDFC Bank gained 1.4 percent to Rs 1,112 and ICICI Bank was up 1 percent at Rs 317.85.