“The demand was unprecedented. It was probably the first time RBI had to issue a circular reimposing the FPI ban during market hours,” said an official with a custodian.
In the circular to custodians on Friday, RBI had said, “We advise that the foreign shareholding by FPIs in HDFC Bank has crossed the overall limit of 74 per cent of its paid-up capital. Therefore, no further purchases of shares of this company would be allowed through stock exchanges in India on behalf of FPIs.” Custodians are responsible for clearing, settling and reporting of FPI trades.
FPI in this case covers American and global depository receipts, foreign direct investment, non-resident Indians, people of Indian origin and foreign institutional investors. They are all allowed to hold up to 74 per cent, under the FDI policy. From stock exchange data, shares worth Rs 15,000 crore of HDFC Bank were traded on both major exchanges on Friday. Around 66 per cent or Rs 10,000 crore worth of trades were marked for delivery.
An official with a custodian said the foreign shareholding in the bank could have climbed to 76 per cent. The stock will now remain in the FPI ban list till the foreign holding comes down. The excess holding will come down through a natural process, as and when foreign investors sell the stock in the market, he explained. RBI had called for a meeting with custodians on Friday after the huge buying on removal of the restrictions. The share had climbed 9.5 per cent to Rs 1,450 on Friday in intra-day trade. However, most of these gains went after RBI reimposed the foreign shareholding ban, with the stock closing only 3.75 per cent higher, at Rs 1,377.
Sources said trades that will not be settled could involve domestic investors as the counter party (sellers) on Friday).