A working group of the Reserve Bank of India (RBI) has recommended increasing the stake of promoters in private banks to 26 percent from the current 15 percent in 15 years. The group constituted by the central bank has also recommended that large companies or industrial houses can be allowed to become promoters of banks after amending the banking regulation law and strengthening the monitoring mechanism for the group.
The Internal Working Group was constituted by the Reserve Bank on June 12, 2020 to review the ownership guidelines and corporate structure of Indian private sector banks. The central bank released the group’s report.
The topics that were given to the group for consideration include eligibility criteria for application of bank license either personally or for units, testing of preferential company structure for banks and making rules suitable in this context and by promoters and other shareholders. A review of the rules for long-term shareholding in banks is included.
Regarding the eligibility of the promoters, the group said that after amending the Banking Regulation Act, 1949 to deal with the inter-connected debt and debt between banks and other financial and non-financial group entities, the big companies / industrial houses got banks Can be allowed to become a promoter of The group has also recommended strengthening the monitoring system for large groups.
It has also suggested that non-banking financial companies (NBFCs) with better operating assets of Rs 50,000 crore and above may be considered to be converted into banks. It also includes units that have corporate houses. But for this 10 years of operation should be a necessary condition.
The group also suggested that the minimum initial capital for new bank licenses for total banking services (Universal) should be increased from Rs 500 crore to Rs 1,000 crore. At the same time, for the Small Finance Bank, it should be increased from Rs 200 crore to Rs 300 crore.
RBI Committee recommends promoters up to 26 per cent exemption in private banks