Foreign investors can buy up to 74 per cent stake in Federal Bank

With an increase in foreign investment limit in Federal Bank to 74 per cent, overseas investors will be allowed to purchase stake in the private bank, the Reserve Bank of India (RBI) said on Friday.

Federal Bank has been removed from the ban list and the restrictions placed on the purchase of shares have been withdrawn with immediate effect, the apex bank said in a notification.

"Equity shares of Federal Bank Ltd, can now be purchased through primary market and stock exchanges," it said.

The restrictions were removed as the government approved increasing foreign investment in Federal Bank from 49 per cent to 74 per cent for its paid up equity share capital.

"... the aggregate shareholding through Foreign Institutional Investors (FIIs)/Non-Resident Indians (NRIs)/Persons of Indian Origin (PIOs)/Foreign Direct Investment (FDI)...in Federal Bank has gone below the prescribed threshold ban limit stipulated under the extant FDI policy," the notification added.

Foreign institutional investors (FIIs), non-resident Indians (NRIs) and persons of Indian origins (PIOs) can invest in primary and secondary capital markets in India through the Portfolio Investment Scheme (PIS).

However, the RBI monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis.

To effectively monitor the limit, the RBI has fixed cut-off points two percentage points lower than the actual ceiling.

Shares in Federal Bank, on Friday, ended at Rs 85.95 apiece on the BSE, up 2.26 per cent from the previous close.