The People's Bank of China (PBOC) — the Chinese central bank — is using the portfolio route to pick up stakes in Indian companies amid the standoff between New Delhi and Beijing in Ladakh and the Modi government tightening its rules on foreign direct investment (FDI) from China.
After picking up a stake in the country’s largest pure mortgage lender HDFC, the PBOC has acquired a very small stake in ICICI Bank through the recently closed Rs 15,000-crore qualified institutional placement (QIP) by the country’s second largest private sector lender.
The PBOC was among 357 institutional investors that subscribed to the issue. Sources confirmed that the Chinese central bank had picked up shares worth Rs 15 crore.
Based on current market capitalisation, the stake of the PBOC in ICICI Bank is about 0.0065 per cent. The share price of ICICI Bank on Tuesday settled with gains of 2.54 per cent, or Rs 9.15, at Rs 369.40 on the BSE.
The Chinese central bank’s latest investment comes after it pared some of its stake in the first quarter of this fiscal in HDFC after a rise in tensions between India and China. It had earlier raised its stake in HDFC to above 1 per cent during the January-March 2020 quarter.
As its holding came below 1 per cent, the PBOC's name did not figure in the list of investors having a stake in the housing finance company as of June-end.
Central banks typically make investments in various asset classes including gold, foreign currencies and bonds, covering both government and corporate ones.
During the QIP of ICICI Bank last week, the Government of Singapore picked up 4.6 crore shares, representing 11.06 per cent of the total size on offer.
Other prominent investors included Morgan Stanley Investment Funds Global Opportunity Fund which picked up 7.31 per cent and Societe Generale-ODI, 5.55 per cent.
Proceeds of the issue will be used towards strengthening the capital adequacy ratio of the bank, improving the bank’s competitive positioning or general corporate requirements apart from any other purposes as may be permissible under the applicable law.
However, the Confederation of All India Traders (CAIT) criticised ICICI Bank for allowing the PBOC to invest in the lender despite strong sentiments prevailing in the country against Chinese companies.
The CAIT said that this was the second such instance of the Chinese bank trying to make inroads into the Indian financial system after it made an investment in HDFC earlier this year.
The traders body asked the finance minister to direct both ICICI Bank and HDFC Ltd to return the investments by the Chinese entity.
The CAIT said in a statement that it has urged finance minister Nirmala Sitharaman to take immediate cognizance of this matter and devise a policy framework to thwart China’s plans and protect the sovereignty of the banking system as also advise the RBI to take necessary steps immediately. CAIT secretary-general Praveen Khandelwal added that there is nothing concrete yet from the RBI to restrain and control the funds coming from China.