The central bank has accepted 21 out of the 33 recommendations made by the internal panel with certain modifications.
However, the central bank has kept under examination one of the most crucial recommendations by the internal working group pertaining to allowing corporate entities to own banks.
Among the most important recommendations accepted by the RBI is raising the long-term holding cap of promoters in private sector banks to 26 per cent from 15 per cent currently. Further, under the same recommendation, existing promoters with holdings below the 26 per cent threshold will be allowed to raise their stake.
“The promoter, if he/she so desires, can choose to bring down holding to even below 26 per cent, any time after the lock-in period of five years,” the RBI circular said.
The regulator has also modified the long-term cap on non-promoter shareholding in banks. The RBI said that long-term non-promoter shareholding will be capped at 10 per cent for natural persons and non-financial entities. However, the same for financial entities will now stand at 15 per cent of the paid-up voting equity share capital.
The RBI has also accepted the working group’s recommendations to allow banks that have a non-operative financial holding company structure to exit the same if they do not have any other group entities. However, the structure of NOFHC will continue to prevail for new licensees with other group entities.
In a setback for payments banks hoping to convert into small finance banks, the RBI said that the criteria of 5 years of experience as a payments bank to get an SFB license will continue along with other requirements mentioned in on-tap licensing for SFBs.
The regulator has also accepted the recommendation that will allow promoters to pledge their shareholding in the bank during the lock-in period. The central bank also said that a new reporting requirement will be brought for disclosures pertaining to pledging of holdings by bank promoters.
The RBI has also raised the minimum capital requirement for applicants for various types of banks. The initial capital for universal banks has been raised to Rs. 1,000 crore from Rs. 500 crore, for SFBs it has been raised from Rs. 200 crore to Rs. 300 crore and for UCBs transitioning to SFBs to Rs. 150 crore from Rs. 100 crore.
The central bank said that the circulars, amendments and instructions for the implementation of the accepted recommendations of the internal working group be notified in “due course”.
