The Reserve Bank of India (RBI) on Thursday tweaked guidelines for ownership structure in private sector banks by allowing shareholding patterns in two broad categories of individuals and legal entities/institutions, but retained the cap on foreign ownership at 74%.
The new norms, which envisage diversified shareholding in private sector banks by a single entity/corporate entity/group of related entities, are aimed at helping them meet the additional capital under the international Basel-III regulations and to rationalise the ownership limits, the RBI said.
The RBI also stipulated separate limits for non-financial and financial institutions, which have been divided into diversified and non-diversified institutions.
The shareholding for non-financial entities and legal persons will be 10%, non-regulated or non-listed entities 15% and well regulated financial institutions can be at 40%.
“For all existing banks, the permitted promoter/promoter group shareholding will be in line with what has been permitted in the February 22, 2013, guidelines on licensing of universal banks at 15%,” it said.
In case any promoter/promoter group is eligible for higher shareholding as per the licensing guidelines, the same will apply and the limits prescribed for all shareholders in the long run will not apply.
“In case of financial institutions that are owned to the extent of 50% or more or controlled by individuals, the shareholding would be deemed to be by a natural person and the shareholding will be capped at 10%,” RBI said.
Under the new norms, the RBI has retained the provision of seeking its prior mandate if someone wants to increase shareholding/voting rights to 5% or more.
Also, the ‘fit and proper’ criterion for acquisition of shareholding in a private bank beyond 5% will continue.