An internal working group set up by the RBI has proposed to increase the promoters’ stake in private banks to 26 percent from the current 15 percent in 15 years.
The group also recommended that large corporate or industrial houses can be allowed to be promoters of banks only after amending the Banking Regulation Act and strengthening supervisory mechanisms for the group, including consolidated supervision.
The Reserve Bank of India formed the Internal Working Group (IWG) on 12 June 2020 to review the existing ownership guidelines and corporate structure for Indian private sector banks. The central bank released the groups’ report on Friday.
The terms of reference for IWG Inter Aalia included review of eligibility criteria for individuals / entities to apply for banking license; Examining the preferred corporate structure for banks and harmonization of norms in this regard; And review of long-term shareholding norms in banks by promoters and other shareholders.
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On the eligibility of promoters, it stated that large corporate / industrial houses may be allowed as promoters of banks, as they deal with the lending and risks between banks and other financial and non-financial institutions. , Make necessary amendments in 1949.
It also made a case for strengthening supervisory mechanisms for large groups, including coordinated supervision.
The panel suggested running large non-banking finance companies (NBFCs) with assets size of Rs 50,000 crore and above, including those owned by corporate houses that could be considered for conversion into banks – On completion of 10 years of operations.
It recommended that the minimum initial capital requirement for licensing new banks should be increased from Rs 500 crore to Rs 1,000 crore for universal banks and Rs 200 crore to Rs 300 crore for small finance banks.
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