The working group of the Reserve Bank of India (RBI) has recommended increasing the share of promoters in private banks from 15 per cent to 26 per cent in 15 years. The group created by the central bank recommends that big companies or industrial firms be allowed to become pioneers of banks after amending the banking regulatory law and strengthening the group’s monitoring mechanism.
The Reserve Bank was formed on June 12, 2020, an internal working group to review the ownership guidelines and corporate structure of Indian private sector banks. The Central Bank released a group report.
Issues given to the group for consideration include the eligibility criteria for applying a bank license to individuals or entities, examining the structure of a preferred company for banks, and in this case and the rules from promoters and other shareholders. Added review of long-term shareholder rules in banks.
With regard to the eligibility of the promoter, the Banking Regulation Act 1949 was amended to deal with interconnected lending and lending between banks and other financial and non-financial group entities.
It suggested that non-bank finance companies (NBFCs) with management assets of Rs 50,000 crore and above could be considered as banks. It also includes units that have corporate homes. But it must be a necessary condition for these 10 years of operation.
The group has suggested that the minimum initial investment of new bank licenses for total banking services (Universal) should be increased from Rs 500 crore to Rs 1,000 crore. At the same time, it should be increased from 200 crores to 300 crores for a small financial bank.
The RBI committee has recommended promoters to exempt 26 per cent of private banks