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FDI is permitted in the banking sector. There is a limit for FDI in the banking sector in India. The important points to be noted here are |
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The aggregate foreign investment in private banks from all sources (FDI, FII, NRI) cannot exceed 74%. |
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Resident Indians at all time should hold at least 26% of the paid up capital of the private sector banks. |
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FDI in the banking sector can be made by individuals also other than foreign banks or foreign banks group. |
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There are guidelines for determining fit and proper person for the purpose of determining foreign investment in the banking sector. |
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There is a limit on the investment by foreign institutional investors to the limit of 10% with the aggregate limit of 24% which can be raised to 49% with the approval of the Board. |
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There is a limit of 5% for individual NRI portfolio investment with the aggregate limit for all NRIs restricted to 10% which could be raised to 24%. |
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FDI and portfolio investment in nationalized banks are subject to overall statutory limits of 20% as provided under Section 3(2D) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. |
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Voting rights are available to the foreign investors by virtue of the legal provision contained in various Indian legislations. |
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Private Sector Banks- Section 12(2) of Banking Regulation Act, 1949. |
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Nationalized Banks- Section 3(2E) of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. |
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State Bank of India- Section 11 of SBI Act, 1955. |
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SBI Associates- Section 19(1) and (2) of SBI (Subsidiary Bank) Act, 1959. |
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Foreign investment by way of transfer of shares of 5% and more of the paid up capital of a private sector banking company, requires prior approval of RBI. Wherever applicable, FDI in banking companies should confirm to provisions regarding shareholding and transfer etc. |
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