ICICI-BoR deal faces govt hurdle:

Regulation defines ICICI Bank as foreign-

owned, making FIPB approval for its
merger with the regional bank necessary
By Asit Ranjan Mishra and Sanjiv Shankaran Mint, New Delhi

Publication: Mint, New Delhi

Date: Friday, May 21 2010

May 21-- ICICI Bank Ltd's takeover of Bank of Rajasthan Ltd (BoR) will have to clear a new
regulatory hurdle before it can be completed, according to a senior official in the industry
ministry.

Most banking mergers can move ahead once they get a green signal from the Reserve Bank
of India

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(RBI), but the deal between India's largest private sector lender and the troubled regional
bank will need to be cleared by thegovernment as well because of the provisions of a
controversial policy that categorizesICICI Bank as a foreign-owned one despite its local
presence and Indian management.
"The merger needs the approval of the FIPB (ForeignInvestment Promotion Board) under
Press Note 3," an official of the department of industrial policy and promotion, which is
responsible for formulating foreign investment policy, told Mint on condition of anonymity.
Under the Press Note 3 of 2009 series, if the ownership of an existing Indian company is
transferred to a non-resident entity, as a consequence of transfer of shares to non-resident
entities through amalgamation, merger or acquisition, then it would require FIPB approval.

Private sector lenders ICICI Bank and HDFC Bank Ltd were defined as foreign-ownedunder
the new rules since more than half their equity is owned by foreign entities, including foreign
institutional investors, who have no board presence or say in company policy.

This regulation is applicable in sectors with foreign direct investment (FDI) caps, such
asdefence production, private sector banking, broadcasting, commodity exchanges,
insurance, print media, telecommunications and satellites,according to the press note.

Any foreign firm trying to gain control of a local company needs the prior approval of FIPB.

A spokesperson for ICICI Bank said the bank would not comment on any issue relating to
BoR till the conclusion of its board meeting on 23 May.

The two banks agreed this week to merge in a deal that has met with a cold reception from
investors and analysts.

An analyst with a consulting firm, who spoke on condition of anonymity, said either of the
banks need to approach FIPB for approval. "It does notmatter which bank approaches FIPB.
One entity can alsoapproach FIPB on behalf of the other," he said.

Under the new regulations, ICICI Bank, with another six banks, has become a foreign-owned
lender as overseasentities hold more than 50% of the company's stake. The shareholding of
foreign institutional investors in ICICI Bank as on 31 March was 65.30%.

RBI had pointed out that the new norms will create a new set of banks that are "owned by
foreigners, but controlled by Indians", thus creating a regulatory challenge for the central
bank.

However, commerce and industry minister Anand Sharma recently said that no change in the
new FDI regulation was needed as it was working just fine.

asit.m@livemint.com

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We lucky few

New Delhi: ICICI Bank will reduce its stake in IT firm 3i Infotech and business process
outsourcing company Firstsource to below 5% within a year, MD & CEO Chanda
Kochhar told FE. Both the firms have substantial operations in the US.

The country's second largest bank is required to cut its holding in these companies to
comply with regulations of the US banking regulator, Federal Reserve.

Kochhar said 3i Infotech was set up as a division of ICICI Bank, which later blossomed
into a separate company. However, she did not elaborate whether the bank will
completely exit these companies or retain the minimum 5% as permitted under the US
Fed regulations.

Though Kochhar did not disclose on how ICICI will cut its stakes in these companies, it
is understood

that the bank is in talks with several buyout firms.

The regulations treat our New York branch like a bank holding company. A bank
holding company or its parent company cannot undertake non-banking business, other
than certain financial services business like securities business. Thus, ICICI Bank cannot
directly or indirectly own more than 5% of a non-banking company which has significant
US operations, ICICI Bank's spokesperson told FE.

ICICI Bank has already reduced its stake in these companies over the past one year
though it is yet to pare it below 5%. The combined holding of ICICI Bank and a fund
managed by ICICI Venture in 3i Infotech has reduced from about 39% to about 23% over
the last year. The holding in Firstsource has been reduced from about 25% to about
19.5%, the spokesperson added.
 The bank already has a full branch in New York and plans to
expand its US operations for which it needs to pare its stakes
in non-banking companies having business in the US. ICICI
Bank already has a branch in New York, which is mainly
permitted to undertake wholesale banking and banking for
NRIs, the spokesperson said.

The US contributes over 50% revenues to the country's $50 billion software services
export industry.

The ICICI Bank spokesperson that these are the only two companies in which the bank
has to cut is stake. These are the only entities to which the licensing condition applies.
None of ICICI Bank's subsidiaries have operations in the US, other than ICICI Securities,
whose US activities are permitted to continue under the regulations, he said.

More from Front Page

New Delhi: ICICI Bank will reduce its stake in IT firm 3i Infotech and business process
outsourcing company Firstsource to below 5% within a year, MD & CEO Chanda
Kochhar told FE. Both the firms have substantial operations in the US.

The country's second largest bank is required to cut its holding in these companies to
comply with regulations of the US banking regulator, Federal Reserve.

Kochhar said 3i Infotech was set up as a division of ICICI Bank, which later blossomed
into a separate company. However, she did not elaborate whether the bank will
completely exit these companies or retain the minimum 5% as permitted under the US
Fed regulations.

Though Kochhar did not disclose on how ICICI will cut its stakes in these companies, it
is understood

that the bank is in talks with several buyout firms.

The regulations treat our New York branch like a bank holding company. A bank
holding company or its parent company cannot undertake non-banking business, other
than certain financial services business like securities business. Thus, ICICI Bank cannot
directly or indirectly own more than 5% of a non-banking company which has significant
US operations, ICICI Bank's spokesperson told FE.

ICICI Bank has already reduced its stake in these companies over the past one year
though it is yet to pare it below 5%. The combined holding of ICICI Bank and a fund
managed by ICICI Venture in 3i Infotech has reduced from about 39% to about 23% over
the last year. The holding in Firstsource has been reduced from about 25% to about
19.5%, the spokesperson added.
 The bank already has a full branch in New York and plans to
expand its US operations for which it needs to pare its stakes
in non-banking companies having business in the US. ICICI
Bank already has a branch in New York, which is mainly
permitted to undertake wholesale banking and banking for
NRIs, the spokesperson said.

The US contributes over 50% revenues to the country's $50 billion software services
export industry.

The ICICI Bank spokesperson that these are the only two companies in which the bank
has to cut is stake. These are the only entities to which the licensing condition applies.
None of ICICI Bank's subsidiaries have operations in the US, other than ICICI Securities,
whose US activities are permitted to continue under the regulations, he said.

More from Front Page

New Delhi: ICICI Bank will reduce its stake in IT firm 3i Infotech and business process
outsourcing company Firstsource to below 5% within a year, MD & CEO Chanda
Kochhar told FE. Both the firms have substantial operations in the US.

The country's second largest bank is required to cut its holding in these companies to
comply with regulations of the US banking regulator, Federal Reserve.

Kochhar said 3i Infotech was set up as a division of ICICI Bank, which later blossomed
into a separate company. However, she did not elaborate whether the bank will
completely exit these companies or retain the minimum 5% as permitted under the US
Fed regulations.

Though Kochhar did not disclose on how ICICI will cut its stakes in these companies, it
is understood

that the bank is in talks with several buyout firms.

The regulations treat our New York branch like a bank holding company. A bank
holding company or its parent company cannot undertake non-banking business, other
than certain financial services business like securities business. Thus, ICICI Bank cannot
directly or indirectly own more than 5% of a non-banking company which has significant
US operations, ICICI Bank's spokesperson told FE.

ICICI Bank has already reduced its stake in these companies over the past one year
though it is yet to pare it below 5%. The combined holding of ICICI Bank and a fund
managed by ICICI Venture in 3i Infotech has reduced from about 39% to about 23% over
the last year. The holding in Firstsource has been reduced from about 25% to about
19.5%, the spokesperson added.
 The bank already has a full branch in New York and plans to
expand its US operations for which it needs to pare its stakes
in non-banking companies having business in the US. ICICI
Bank already has a branch in New York, which is mainly
permitted to undertake wholesale banking and banking for
NRIs, the spokesperson said.

The US contributes over 50% revenues to the country's $50 billion software services
export industry.

The ICICI Bank spokesperson that these are the only two companies in which the bank
has to cut is stake. These are the only entities to which the licensing condition applies.
None of ICICI Bank's subsidiaries have operations in the US, other than ICICI Securities,
whose US activities are permitted to continue under the regulations, he said.

More from Front Page

vNew Delhi: ICICI Bank will reduce its stake in IT firm 3i Infotech and business process
outsourcing company Firstsource to below 5% within a year, MD & CEO Chanda
Kochhar told FE. Both the firms have substantial operations in the US.

The country's second largest bank is required to cut its holding in these companies to
comply with regulations of the US banking regulator, Federal Reserve.

Kochhar said 3i Infotech was set up as a division of ICICI Bank, which later blossomed
into a separate company. However, she did not elaborate whether the bank will
completely exit these companies or retain the minimum 5% as permitted under the US
Fed regulations.

Though Kochhar did not disclose on how ICICI will cut its stakes in these companies, it
is understood

that the bank is in talks with several buyout firms.

The regulations treat our New York branch like a bank holding company. A bank
holding company or its parent company cannot undertake non-banking business, other
than certain financial services business like securities business. Thus, ICICI Bank cannot
directly or indirectly own more than 5% of a non-banking company which has significant
US operations, ICICI Bank's spokesperson told FE.

ICICI Bank has already reduced its stake in these companies over the past one year
though it is yet to pare it below 5%. The combined holding of ICICI Bank and a fund
managed by ICICI Venture in 3i Infotech has reduced from about 39% to about 23% over
the last year. The holding in Firstsource has been reduced from about 25% to about
19.5%, the spokesperson added.
The bank already has a full branch in New York and plans to expand its US operations
for which it needs to pare its stakes in non-banking companies having business in the US.
ICICI Bank already has a branch in New York, which is mainly permitted to undertake
wholesale banking and banking for NRIs, the spokesperson said.

The US contributes over 50% revenues to the country's $50 billion software services
export industry.

The ICICI Bank spokesperson that these are the only two companies in which the bank
has to cut is stake. These are the only entities to which the licensing condition applies.
None of ICICI Bank's subsidiaries have operations in the US, other than ICICI Securities,
whose US activities are permitted to continue under the regulations, he said.

More from Front Page