Private sector bank stocks resounded to rumours that foreign investment ceiling in these banks will be raised to 100% from the current 49%.

A flurry of activity was seen in these banks and covered Vysya Bank (up 5.75 % to Rs 261), IndusInd Bank (up 4.91% to Rs 17.10), Centurion Bank (up 3.83% to Rs 9.50), Bank of Rajasthan (up 4.27% to Rs 17.10), South Indian Bank (up 3.73% to Rs 38.90) Bank of Punjab (up 5.32% to Rs 14.85), Federal Bank (up 4.63% to Rs 98.40), Karnataka Bank (up 4.44% to Rs 60), IDBI Bank (up 3.60% to Rs 25.90), GTB (up 4.27 % to Rs 17.10), UTI Bank (up 1.61% to Rs 44.20), Karur Vysya Bank (up 1.19% to Rs 183.30) and ICICI Bank (up 0.70% to Rs 150.85).

However, some analysts hold that these scrips are being driven mainly by operators and the reports are totally baseless. It is contended that the industry has not even asked for a hike in FDI limit! At present, the government permits 49% FDI in private sector banks through the Foreign Investment Promotion Board route and a Foreign Institutional Investment limit of 49%, which together accounts to 98%. Therefore, analysts think that the possible hike in FDI limit accounts for nothing.

Analysts say private sector banks have, in fact, asked to increase voting rights of foreign investors (currently at a limit of just 10%) rather than investment limit. They feel that a hike in voting rights will enable banks to tie-up with strategic investors. Smaller private banks are expected to see consolidation in the near future and a hike in voting rights could help these banks garner strategic investors for themselves.

In the last week, 18 private sector banks added Rs 1,004.12 crore (Rs 10.04 billion) or 5.11% to Rs 20,652.18 crore (Rs 206.52 billion) in market capitalisation following huge accumulation from market players on hopes that the forthcoming Union Budget 2003-04, slated for 28 February 2003, will bring huge sops to the banking sector.