RBI panel to review banks’ governance norms

HYDERABAD: The RBI on Friday constituted an internal working group to review bank licensing norms, guidelines on promoter ownership and corporate structure for private sector banks.

The committee will submit its report by September, 30. The five-member panel includes RBI board members Dr P K Mohanty and Prof Sachin Chaturvedi, executive directors Lily Vadera and S C Murmu, and RBI’s Chief General Manager Shrimohan Yadav.

The committee will review licensing guidelines and regulations relating to ownership and control in private banks and suggest appropriate norms shedding light on excessive concentration of ownership and control. Importantly, the committee will look into promoter shareholding norms at the initial licensing stage and later, along with the timelines for stake dilution.

The move comes weeks after private sector lender Kotak Mahindra Bank’s legal battle against the central bank ended with the latter allowing more time to dilute the lender’s promoter’s stake.  

According to RBI, the broad policy relating to ownership and control in Indian private banks is guided by the framework issued in February, 2005. Though the overarching principle that the ownership and control of private sector banks should be well diversified and that the major shareholders are ‘fit and proper’, have remained unchanged, the specific contours have evolved over the years with specific prescriptions being given as part of licensing guidelines issued at various points in the past.

“It is, therefore, felt necessary to compressively review the extant guidelines on ownership, governance and corporate structure in private sector banks, taking into account key developments over the years which have a bearing on the issue. The review would provide an opportunity to harmonise norms applicable to banks set up at different time periods, irrespective of their date of commencement of business,” it noted.

Meanwhile, it will also review and recommend eligibility criteria for individuals and entities to apply for a banking license. It will also study the current regulations on holding of financial subsidiaries through non-operative financial holding companies.

Forex reserves cross $500 billion
For the first time, India’s foreign exchange reserves have crossed the half a trillion dollar mark in the week ended June 5, the RBI’s data showed on Friday
India’s reserves surged $8.22 billion over the week to hit its fresh lifetime high of $501.7 billion. Foreign currency assets (FCA) climbed by $8.42 billion to $463.63 billion.
In the week ended May 29, forex reserves had increased by $3.43 billion to a record $493.48 billion