The path of India's large corporate houses to enter the banking sector may be cleared. An RBI committee has recommended allowing non-banking financial companies (NBFCs) operated by these corporate houses to operate as a whole bank. Not only this, the present limit of promoters' participation in these banks has been increased from 15% to 26%. In order to implement these recommendations, the government will have to discuss many levels and make huge amendments in the Banking Act. But after implementing them, there will be a big change in the banking sector of India.
The RBI had set up an internal working group in June 2020 to suggest changes in the pattern of equity holding in banks, the report of which was made public on Friday. The first suggestion of the Working Group is that in 15 years the promoters' participation should be 26%. Secondly, the shareholding limit for non-promoter partners should be 15%. The third suggestion is that large corporate houses or industrial companies should be allowed to become promoters through amendments to the Banking Act, 1949.
There is a recommendation to convert NBFCs of size of more than Rs 50,000 crores run by big companies into banks after 10 years of operations. This means that NBFCs like Bajaj Finance, L&T Finance will now be able to convert into banks. Payment Bank has also been recommended to convert Small Finance Bank and Payment Bank into Universal Bank for a six-year experience over a three-year experience. The capital base limit for banking licenses has been recommended to be increased from Rs 5,00 crore to Rs 1,000 crore.
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RBI's internal working group moots raising promoter stake in banks