INDIA BUSINESS WORLD - JANUARY 2006
THE MONTH THAT WAS

TEMASEK BARRED FROM RAISING ICICI STAKE

The Reserve Bank of India (RBI) has barred Temasek Holdings — the investment arm of the Singapore government — from further raising its stake in ICICI Bank, India 's largest private sector bank. Temasek was keen to invest in the ICICI Bank mega equity issue in December, but had to back off after the RBI spelt out its stand to the bank.

The banking regulator is of the view that Temasek and other investors associated with the Singapore government, like the Government of Singapore Investment Corporation (GIC) and Monetary Authority of Singapore are all ‘related entities'. According to RBI norms, the combined holding of an investor and entities related to it should not exceed 10% in a private bank. However, the India-Singapore treaty, signed last year, categorically puts it that Temasek and GIC “operate independently and do not act in concert.”

Thus, the RBI has refused to make any exception for Temasek in the ownership guidelines for private banks. By sticking to norms it feels so strongly about, industry observers think, RBI appears to have gone against the provisions of the treaty.