Rural Electrification Corporation (REC) will seek the Reserve Bank of India's approval to increase the stake of foreign institutional investors in it to 35 per cent from the current 24 per cent.

The approval is expected to come by the end of this month, said J M Phatak, chairman and managing director. The company's shareholders today approved a proposal to raise the limit of total holdings of FIIs to the higher level.

"On July 8, FII holdings in REC were 22 per cent, while overall limit is 24 per cent. RBI keeps a gap of two per cent between the overall limit and the FII holding," said H D Khunteta, the director (finance).

The company is also mulling floating a private sector bank, possibly in a tie-up with a foreign bank or with PFC, another power financing firm, said Phatak. It has set up a committee to study the idea. RBI is expected to announce a policy for setting up new private sector banks.

REC will not hold more than 50 per cent stake in the proposed venture, Khunteta said. "We can tie up with a foreign bank which has prior experience in this sector and which is keen to come to India," he added. The company also expects to disburse loans of about Rs 28,000 crore in 2010-11."We have signed up for borrowing worth $400 million (Rs 1,870 crore) and the money would come in by September," said the CMD.

The shareholders approved a final dividend for 2009-10 at Rs 3.50 per share. This is in addition to an interim dividend of Rs 3 per share, paid in January. The total dividend for 2009-10, at Rs 6.50 per share, is up by 44 per cent on that of Rs 4.50 per share last year, a company statement said.