The Foreign Investment Promotion Board (FIPB) has cleared a proposal by ICICI Bank to divest 24 per cent stake in ICICI Financial Services, the bank’s holding firm for insurance business, in favour of foreign players. The proposal will now go to the finance minister P Chidambaram for final approval. The largest private sector bank will also have to seek RBI’s nod before it can sell 24 per cent stake to any foreign investor, sources added.

FIPB had earlier rejected the bank’s proposal on the ground that Section 2(g)(i) of IRDA regulations does not allowa subsidiary company to be a promoter of insurance business. However, ICICI Bank is of the view it would continue to be the promoter of its insurance businesses — ICICI Prudential Life Insurance and ICICI Lombard General Insurance — despite transfer of shares from ICICI Bank to ICICI Financial Services and as such there was no violation of regulations. ICICI Bank group head (strategy) and communication officer Kalpana Morparia had recently met Department of Economic Affairs secretary D Subbarao to put forward the bank’s views.