For Quick Alerts
For Daily Alerts

Private bank shares rally as RBI allows foreign banks' subsidiary to acquire private banks

Private bank shares gain on foreign banks' guidelines
Karnataka Bank: Quotes, News
BSE 70.85BSE Quote0.2 (-0.28%)
NSE 70.65NSE Quote0.45 (-0.64%)
Lakshmi Vilas Bank: Quotes, News
BSE 23.20BSE Quote1.2 (-5.17%)
NSE 23.20NSE Quote1.2 (-5.17%)
Shares in private banks rallied after the RBI allowed foreign bank's subsidiary to acquire private banks. Shares of Karnataka Bank was up 4%, while South Indian Bank was up 3.23% and Lakshmi Vilas Bank gained 4.4%.

The Reserve Bank has allowed wholly-owned subsidiary (WOS) of foreign banks to acquire domestic private sector banks as well as set up branches anywhere in the country.

"As a locally incorporated bank, the WOSs will be given near national treatment which will enable them to open branches anywhere in the country at par with Indian banks (except in certain sensitive areas where the Reserve Bank's prior approval would be required)," the RBI guidelines said.

According to the RBI guidelines, foreign bank subsidiary will be allowed to hold upto 74 per cent, for overall foreign investment, in the private banks, with permission to list on local stock exchanges.

Moreover, as a part of safety measures to restrict the foreign banks domination on Indian Banking system, RBI will put a stop on further entry of new WOSs of foreign banks or capital infusion, when the capital and reserves of all foreign banks in India exceed 20 per cent of the capital and reserves of the entire banking system.

As per the guidelines, the initial minimum paid-up voting equity capital or net worth for a WOS would be Rs 500 crore. with inputs from Dion Global Solutions Ltd

Story first published: Thursday, November 7, 2013, 10:54 [IST]
Company Search
Get Instant News Updates
Notification Settings X
Time Settings
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more