RBL to seek DPIIT nod to raise its FDI ceiling to 74% – News Air Insight

Mumbai: RBL Bank plans to approach the Centre to have its foreign direct investment (FDI) limit raised to 74% from 49%, two people familiar with the development told ET. A higher overseas ownership threshold at RBL is needed for processing the biggest announced FDI to date in Indian banking, involving the local lender’s takeover by the Emirates NBD Bank.

The RBL application to the Department for Promotion of Industry and Internal Trade (DPIIT) for having the FDI ceiling raised will follow shareholder approval for the private lender’s announced deal with Emirates NBD, to be taken up at the Extraordinary General Meeting (EGM) on November 12.

The agreement between RBL and Emirates NBD Bank PJSC, the UAE’s second-largest bank, involves the latter’s acquisition of a 60% stake in the Indian private sector lender.

“Currently, the FDI limit is capped at 49% in RBL Bank. Once shareholder approvals are in place, the lender will approach DPIIT to hike the limit to 74%, which is one of the prerequisites for the deal to go through,” said an official involved in the discussions.

RBL Bank did not respond to ET’s query.

Emirates NBD has agreed to invest $3 billion (₹26,850 crore) to acquire a majority stake in RBL Bank, marking the largest acquisition of an Indian bank by a foreign financial institution and the biggest FDI inflow into India’s banking sector.

Above Threshold
While the overall FDI limit allowed by law in private sector banks is up to 74%, foreign investment of up to 49% is permitted through the automatic route. Any investment beyond that threshold requires government approval. The capital infusion, via a preferential allotment at ₹280 per share, will give Emirates NBD a 60% stake in RBL Bank’s expanded equity base.

An open offer for an additional 26% will follow. Given the 74% cap on foreign ownership in Indian banks, Emirates NBD will pare its holding if the open offer is fully subscribed. Currently, about 22% of RBL’s shares are held by foreign investors, which will dilute to roughly 11% post the primary infusion.

The transaction will equip RBL Bank with significant growth capital to expand its corporate lending book and accelerate its retail and microfinance businesses. The partnership is also expected to strengthen RBL’s digital payments ecosystem, broaden its distribution network, and create opportunities in the India-Middle East trade corridor.

“This collaboration will enable us to leverage our digital and technological strengths, participate more actively in large-ticket corporate lending, and strengthen our brand and compliance culture,” R Subramaniakumar, MD & CEO, RBL Bank, said on October 19.