Reserve Bank of India rejects proposal on corporate ownership of banks

WION Web Team
New Delhi, India Published: Nov 27, 2021, 10:49 AM(IST)

Reserve Bank of India Photograph:( Reuters )

Story highlights

India's central bank has modified the rules of ownership and the corporate structure of private banks in India

The Reserve Bank of India has rejected a proposal by big business houses asking to mull on granting them banking license.

India's central bank has modified the rules of ownership and the corporate structure of private banks in India.

Under the new rules significant shareholders in a non-state bank, known as bank promoters, must only reduce their stake to 26 per cent stake after 15 years, the central bank said, rather than to the current limit of 15 per cent within that timeframe.

The new norms allow those who have already diluted stakes to hike their shareholding.

Also read | Indian crypto investors may get exit time if govt bans trade: Report

The Internal Working Group had made 33 recommendations, out of which the RBI has accepted 21.

"The remaining recommendations are under examination," the RBI said.

The central bank said payments banks must operate for at least five years before applying to become small finance banks (SFB), longer than the group's recommendation of three years of operations as sufficient to graduate into an SFB.

According to the RBI, ''This stipulation (concerning the dilution of promoters' stakes) should be uniform for all types of promoters and would not mean that promoters, who have already diluted their holdings to below 26 per cent, will not be permitted to raise it to 26 per cent of the paid-up voting equity share capital of the bank.'' 

Also read | Fifteen more countries recognise India's COVID-19 vaccination certificate

Non-promoter shareholdings will continue to be capped at 10 per cent for individuals and non-financial institutions but will be allowed up to 15 per cent of the equity share capital of a bank in the case of all categories of financial institutions, supranational institutions, public sector bodies or government, the RBI said.

A year ago an RBI working group recommended that banking regulations be amended to allow large industrial groups to act as bank promoters and own big stakes in a lender.

Such a move could transform the country's banking landscape but is something the central bank has strongly resisted in the past.

(With inputs from agencies)

Read in App