RBI raises the gate for private banks

RBI said any private or foreign bank that doesn’t meet these draft guidelines will be required to indicate a time-bound plan to reduce such investments to the permissible limit.

RBI says promoter holding in case of a new licence for private sector banks, may be higher to start with — as at present — but will be required to be brought down to the limit of 10 per cent in a time-bound manner normally within a period of three years.

The policy, RBI said, aims at ensuring that the ultimate ownership and control of private sector banks is well diversified. It also seeks to ensure that the important shareholders (with shareholding of five per cent and above) are “ fit and proper”. In the interest of diversified ownership of banks, the objective will be to ensure that no single entity or group of related entities has shareholding or control, directly or indirectly, in any bank in excess of 10 per cent of the paid up capital of the private sector bank. Any higher level of acquisition will be with the prior approval of RBI and in accordance with the guidelines of February 3, 2004 for grant of acknowledgement for acquisition of shares.

RBI will constitute an independent advisory committee which would make recommendations to it for dealing with applications for grant of acknowledgement for meeting the minimum capital requirement criteria of Rs 300 crore.

Tough norms

• No entity should have shareholding in excess of 10% in a private bank

• Founders of new banks will be allowed a higher holding at the start, but must bring it down to 10 % within three years

• Large industrial houses will not be allowed to set up banks but can buy a maximum stake of 10 % in a pvt bank with the RBI nod

• A private or foreign bank with a presence in India can hold a maximum stake of five % in a private bank