RBI To Review Ownership And Control Of Private Banks

On Friday, the Reserve Bank of India (RBI) said that it has constituted an Internal Working Group (IWG) to review the ownership guidelines and corporate structure of private sector banks.

"RBI has constituted an IWG to review the extant guidelines on ownership and corporate structure for Indian private sector banks," the central bank said in a press release.

The IWG will be headed by RBI executive director P.K. Mohanty.

The ownership and corporate structure guidelines currently followed are as per RBI's February 2005 framework. The study that will be conducted by this group will take into account key developments over the years in regards to control and ownership.

"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," the press release said.

The examination of current guidelines on ownership comes after large shareholders of some private sector banks sought RBI's permission to raise their stakes beyond the permitted 15 percent. Currently, bank licensing rules require a private bank's promoter to pare holding to 40 percent within three years of commencing operations, 20 percent in 10 years and to 15 percent in 15 years. The rules have changed over the years.