If approved, these tweaks would also pave the way for corporate ownerships of banks, so far a highly regulated space.
The main features of such a framework could include relaxations in ownership and management criteria for these banks to make room for a wider pool of bidders such as nonbanking finance companies (NBFCs) that are owned by corporate groups. They could participate in the disinvestment process as long as the financial services business accounts for more than 60% of the turnover of these groups, according to the people cited above. This could mean entities such as Tata Capital, L&T Finance or Aditya Birla Group being left out.
IDBI Bank Privatisation Discussions On
The RBI could impose safeguards such as insisting on ringfencing of the nonfinancial and financial services businesses of corporate groups. “There is a view that an independent and self-contained dispensation for privatisation of public sector banks will help attract more investors and expand the bidder universe for these assets,” said a person briefed on the matter.
Also under consideration are the easing of norms to pare promoter stakes and relaxations in restrictions on voting rights of promoter shareholders besides allowing the greater participation of sovereign wealth funds (SWFs) of friendly countries, said the people cited above. A government official confirmed that discussions are on with the banking regulator over issues related to the IDBI Bank stake sale and that this could evolve into a common framework for privatisation of all PSU banks.
“Some of these suggestions were already recommended by an internal working group set up by the RBI itself,” he said. “We have sought further clarity, and made some suggestions based on the same.”
The RBI last year released an internal working group review of ownership guidelines for private sector banks, including their corporate structure. While it had sought comments from stakeholders, no decision has been taken on the matter. One of the report’s key recommendations was that large corporate/industrial houses may be allowed as promoters of banks after amendments to the Banking Regulation Act, 1949. It also suggested that large NBFCs with an asset size of ₹50,000 crore and above, including those owned by corporates, may be considered subject to certain criteria.
