Despite the ‘Boycott China’ campaign, China’s central bank invests in ICICI Bank

Despite the 'Boycott China' campaign, China's central bank invests in ICICI Bank

The People’s Bank of China has now made an investment in ICICI Bank after the investment by the Chinese central bank in mortgage lender HDFC Ltd created a flutter on the Indian market earlier this year. The Chinese bank has emerged as one of the investors in the Rs 15,000 crore capital raising exercise carried out by ICICI Bank which ended last week. Under eligible institutional placement, it signed a Rs 15 Crore cheque in the private sector.

According to experts, a Chinese bank’s current investment in ICICI Bank poses no threat, since banking is a highly regulated business. Government of Singapore, Morgan Investment and Societe Generale were among the influential investors. It makes good sense for the Chinese central bank, which is flush with capital, to diversify part of its war-chest into countries such as India instead of remaining invested in the US and Europe. The US and China are now engaged in a trade war that has now spread deeper into their business areas.

The investment by Chinese bank in the mortgage lender was actually too small to impact or pose a threat to an RBI regulated entity such as HDFC Ltd. The People’s Bank of China has also decreased its interest in HDFC Ltd below 1 per cent in the last three months, as the shareholding trend for June does not indicate it under the significant 1 per cent interest band.