Bank of baroda

BANK OF BARODA
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in corresponding new banks is regulated by the provisions of the Bank Acquisition Act. Under Section
3(2D) of these statutes, foreign investment in corresponding new banks is subject to an overall statutory limit of 20% of
the paid up capital of the bank.
Section 3(2D) Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 states as follows:
“(2D) The shares of every corresponding new bank not held by the Central Government shall be freely transferable:
Provided that no individual or company resident outside India or any company incorporated under any law not in force
in India of any branch of such company, whether resident outside India or not, shall at any time hold or acquire by
transfer or otherwise shares of the corresponding new bank so that such investment in aggregate exceed the percentage,
not being more than twenty per cent of the paid-up capital as may be specified by the Central Government by notification
in the Official Gazette.
Explanation— For the purposes of this clause “company” means any body corporate and includes a firm or other
association of individuals.”
Hence, Section 3(2D) of the Bank Acquisition Act prescribed that foreign investment in the aggregate is permitted in the
correspondent new bank, like our Bank only till 20% under the automatic route. For public sector banks the RBI monitors
the ceilings on FII/NRI/PIO investments on a daily basis. For effective monitoring the RBI has fixed cut off points lower
than the actual ceilings, which is 18% for public sector banks. Once the aggregate net purchase of equity shares reaches
the cut off points further acquisition of equity shares by FIIs/NRIs/PIOs requires approval of the RBI.

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