KOCHI: Even as the Reserve Bank of India (RBI) maintains a firm cap of 15 per cent on single-entity ownership in banks, an interesting pattern has emerged in the Indian banking space – for varied reasons, a handful of foreign entities have managed to break past this ceiling and now hold significantly larger stakes.
Whether it’s to rescue a troubled lender, bring in long-term strategic capital, or facilitate smoother transitions, the end result has been the same: foreign investorsnow rank among the biggest individual shareholders in several Indian banks.
Interestingly, this is a distinction that domestic private promoters no longer enjoy under the current regulatory framework.
Have you ever noticed that while no single Indian entity is allowed to own more than 15 per cent in a bank, the biggest stakes in the banking sector are actually held either by the Government of India or foreign investors?
It’s not by design, but it’s a pattern that’s hard to ignore. and certainly emerging.
The Reserve Bank of India (RBI) caps individual or entity ownership in private sector banks at 15 per cent – a rule designed to ensure wide, diversified ownership and avoid concentration of control.
Most Indian private banks – from HDFC Bank to ICICI Bank — follow this playbook. But look close, and you’ll see a different story unfolding.
The foreign hand
CSB Bank (formerly Catholic Syrian Bank) is one example. Canadian investor Fairfax was allowed to acquire 51 per cent in 2018 to help recapitalise the bank.
Though it has pared its stake slightly since then, it still holds close to 49 per cent, far above the usual 15 per cent limit.
Yes Bank is a newer case. Japanese banking giant Sumitomo Mitsui Banking Corp (SMBC) has been allowed to acquire a 20 per cent stake, making it one of the largest foreign strategic investments in an Indian private lender in recent times.
Then there’s Lakshmi Vilas Bank (LVB), which was absorbed by DBS Bank of Singapore in 2020 following a financial crisis. DBS now owns 100 per cent of what is now DBS Bank India – making it a rare example of a fully foreign-owned Indian bank.
Government: The other big holder
At the other end of the spectrum is the Government of India, which directly or indirectly owns the majority of public sector banks.
 In IDBI Bank, the government and LIC together still hold over 94 per cent. Though its privatisation is underway, most of IDBI Bank’s ownership today remains firmly in the state’s hands.
Interestingly, her too, two of the three final bidders in the race to acquire a majority stake in IDBI Bank are foreign players — Emirates NBD of Dubai and Fairfax again – setting the stage for yet another large Indian bank potentially ending up under foreign control.
Kotak: The rare Indian outlier
One exception often cited is Uday Kotak, who was allowed to retain a 26 per cent stake in Kotak Mahindra Bank after a long-drawn-out exercise- largely due to historical reasons, as the bank originated from a financial services firm he founded. Even so, his voting rights are capped at 15 per cent, keeping him within regulatory bounds when it comes to control.
An unspoken shift
None of this is accidental – each case came with specific regulatory rationale. Be it rescuing a failing bank, attracting strategic capital, or managing legacy ownership, the RBI’s approvals have been contextual.
Yet, taken together, these instances reveal an unspoken shift: While Indian private entities remain subject to tight ownership caps, it is foreign investors and the state, who are emerging as the largest stakeholders in India’s banking system.
It’s a pattern worth noting – and one that might reshape the ownership contours of Indian banking for years to come.
