A working group of the Reserve Bank of India has recommended allowing large corporates to be bank promoters after bringing in amendments to the Banking Regulations Act of 1949.
It has also advocated for increasing the cap on promoters’ stake to 26 per cent from the present 15 per cent in the long run of 15 years and suggested that this stipulation be uniform for all types of promoters, meaning that promoters, who have already diluted their holdings to below 26 per cent, will be permitted to raise it to 26 per cent of the paid-up voting equity share capital of the bank.
“The promoter, if he/she so desires, can choose to bring down holding to even below 26 per cent, any time after the lock-in period of five years," the RBI said.
The working group has also suggested that there should be no intermediate sub-targets between 5-15 years for promoters to reduce their shareholding in the bank after the lock-in period.
However, at the time of the issue of licences, the promoters may submit a dilution schedule which may be examined and approved by the RBI. The progress in achieving these agreed milestones must be periodically reported by the banks and shall be monitored by the Reserve Bank.
The group, however, has suggested that there be no changes in the initial lock in requirements for bank promoters, which may continue as minimum 40 per cent of the paid-up voting equity share capital of the bank for the first 5 years.
The working group of the RBI, formed to review the extant licensing and regulatory guidelines relating to ownership and control, corporate structure and other related issues in private sector banks in India, has said well-run large non-banking finance companies, with a size of Rs 50,000 crore and above, including those which are owned by a corporate house, may be considered for conversion into banks provided they have completed 10 years of operations and meet the due diligence criteria and satisfy the additional conditions specified in this regard.
According to the recommendations of the working group, for getting a universal banking license the net worth required may be increased to Rs 1,000 crore, while for small finance banks (SFBs), the net worth required may be increased to Rs 300 crore, and for urban co-operative banks (UCBs) transiting to SFBs, the net worth should be Rs 150 crore which has to be increased to Rs 300 crore in 5 years.
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