RBI panel proposes to raise promoters cap to 26 pc in private banks

An inside working group arrange by the RBI has proposed to lift the cap on promoters’ stake in non-public banks from the present 15 per cent to 26 per cent in 15 years.

The group has additionally really useful that enormous company or industrial homes could also be allowed as promoters of banks solely after amendments to the Banking Regulation Act and strengthening of the supervisory mechanism for conglomerates, together with consolidated supervision.

The Reserve Bank of India had constituted the interior working group (IWG) on June 12, 2020, to overview extant possession pointers and company construction for Indian non-public sector banks. The central financial institution launched the teams’ report on Friday.

The phrases of reference of the IWG inter alia included a overview of the eligibility standards for people/entities to use for banking license; examination of most well-liked company construction for banks and harmonisation of norms on this regard; and overview of norms for long-term shareholding in banks by the promoters and different shareholders.

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On eligibility of promoters, it mentioned massive company/industrial homes could also be allowed as promoters of banks solely after needed amendments to the Banking Regulations Act, 1949 to take care of linked lending and exposures between the banks and different monetary and non-financial group entities.

It additionally made a case for the strengthening of the supervisory mechanism for giant conglomerates, together with consolidated supervision.

The panel additionally steered nicely run massive non-banking finance corporations (NBFCs) with an asset measurement of Rs 50,000 crore and above, together with these owned by a company home, could also be thought of for conversion into banks – topic to completion of 10 years of operations.

It really useful the minimal preliminary capital requirement for licensing new banks ought to be enhanced from Rs 500 crore to Rs 1,000 crore for common banks and from Rs 200 crore to Rs 300 crore for small finance banks.