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    500302   INE140A01024


SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

India central bank sidesteps proposal on corporate ownership of banks

11/26/2021 | 07:57am EST

MUMBAI, Nov 26 (Reuters) - India's central bank said on Friday it would reform rules on the structure of private sector banks but a source familiar with the matter said the changes would not include allowing industrial groups to own lenders.

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

Bank promoters currently do not include industrial groups whose holdings in a bank are capped at 10%.

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.

Bajaj Group, Piramal Group and Reliance Industries are well-positioned to expand into banking, an investment banker who did not wish to be named said last year when the working group made its recommendations.

A source familiar with the matter said on Friday, however, that the RBI had decided against allowing corporates to own banks.

The RBI said it was accepting 21 of 33 recommendations made by the working group and had made some partial modifications where it considered them to be necessary.

"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.

On the new rule concerning the dilution of promoters' stakes, the central bank said:

"This stipulation should be uniform for all types of promoters and would not mean that promoters, who have already diluted their holdings to below 26%, will not be permitted to raise it to 26% of the paid-up voting equity share capital of the bank," the RBI said.

Non-promoter share holdings will continue to be capped at 10% for individuals and non-financial institutions but will be allowed up to 15% 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. (Reporting by Swati Bhat and Nupur Anand; Editing by Kirsten Donovan and Susan Fenton)

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
PIRAMAL ENTERPRISES LIMITED -2.08% 2527 End-of-day quote.-4.34%
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