![RBI's internal working group moots raising promoter stake in banks](https://media.newstracklive.com/uploads/business-news/economy/Nov/21/big_thumb/RBI_5fb89a5c32477.jpg)
The Reserve Bank of India (RBI) has constituted Internal Working Group to review extant ownership guidelines and corporate structure for Indian private sector banks.
It suggested that the cap on promoters’ stake should be raised to 26 per cent over a period of 15 years from the current 15 percent. On non-promoter shareholding, the working group recommended a uniform cap of 15 per cent for all shareholders.
The Internal Working Group has also recommended that large corporate/industrial houses may be allowed as promoters of banks only after necessary amendments to the Banking Regulation Act, 1949 (to prevent connected lending and exposures between the banks and other financial and non-financial group entities) and strengthening of the supervisory mechanism for large companies, including consolidated supervision.
The Working Group has also suggested doubling the minimum initial capital requirement for licensing new banks from Rs.500 Cr to Rs.1000 Cr for universal banks and raising it from Rs 200 Cr to Rs 300 Cr for small finance banks. Meanwhile, the report is placed on the RBI website for comments, which would further be examined by the central bank before coming to a conclusion.
As many as 14 licenses for universal banks have been issued in the private sector since 1993, out of which just 10 are operational. However, none of these banks could break into the global top-100 by asset size. As on December 31, 2019, the asset size of HDFC Bank, Bank of Baroda, ICICI and Axis Bank stood much lower than Spanish Banco de Sabadell, a Spanish bank, which ranks 100th.
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