The Reserve Bank of India (RBI) on Thursday reviewed the extant guidelines on ownership in private sector banks which envisaged diversified shareholding.
The guidelines have been reviewed against the background of the guidelines on licensing of new banks in the private sector issued in February 2013, the need for additional capital for the banks consequent to the implementation of Basel III capital regulations and to rationalise the ownership limits. It has stipulated various principles for shareholding by promoters, other entities and individuals in private sector banks after the review.
Ownership limits for all shareholders in the long run are now stipulated under 2 broad categories — natural persons (individuals) and legal persons (entities/institutions). Also, separate limits are now stipulated for non-financial and financial institutions, and among financial institutions, for diversified and non-diversified financial institutions.
The proposed shareholding cap for ‘natural person’ and ‘non-financial institutions/entities legal person’ would be 10%, ‘non-regulated or non-diversified and non-listed legal person’ would be 15% and for ‘regulated well diversified and listed/ supranational institution/public sector undertaking/government’, the cap stands at 40%. In case of the special circusmstances, the cap would be permitted on a case to case basis, the RBI said in a release.
It also proposed that any acquisition of shareholding/voting rights of 5% or more of the paid-up capital of the bank or total voting rights of the bank would continue to be subject to obtaining prior approval from the apex bank.
Welcoming the decision, Charan Singh, RBI Chair at Indian Institute of Management (IIM), Bangalore said, “This decision is really important given that the RBI has been very proactive in distributing banking licences.”
“It has been done keeping in mind the safety of despositors, as it is regulators who are responsible to safegaurd them,” Singh added.
Published 12 May 2016, 19:22 IST