India defends blocking Temasek, GIC on ICICI stake

September 22, 2006
Singapore Democrats

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ZeeNews On-line
22 Sep 06

http://www.zeenews.com/znnew/articles.asp?aid=324056&ssid=50&sid=BUS

India has denied violating an agreement with Singapore by blocking two of its entities from doubling stake in ICICI Bank Ltd, the leading private sector lender in the sub-continent nation.

Reacting to Reserve Bank of India rejecting the bid of Temasek holdings pte and Government of Singapore Investment Corp to increase stake in ICICI Bank by 10 per cent each, Finance Minister P Chidambaram said the Comprehensive Economic Cooperation Agreement (CECA) signed by the two governments last year does not cover investment in banks.

Investments in banks are governed by guidelines and regulations issued by the reserve bank, which treats the two investors as related entities, he told Bloomberg here. India is not “violating either the letter or spirit of CECA.”

RBI, which limits the combined holding of an overseas investor and related entities in a private bank to 10 per cent, last month rejected Temasek and GIC’s bid, which would have doubled their combined stake worth USD 1.2 billion.

Singapore and India in June 2005 signed the accord under which GIC, which manages the city’s foreign reserves, and Temasek, the state-owned fund, would be treated as separate, unrelated entities in terms of their investment applications.

India has explained to Singapore its stand that the agreement did not apply to banks, Chidambaram said.

“They have to come back to us now,” he said. “As CECA stands now, we are adhering to the letter and spirit. If CECA requires any further amendment, we have to consider that separately.”

As the agreement with Singapore stands now, the move to block the city-state’s entities from raising their ICICI Bank stake “won’t be reconsidered,” Chidambaram said.