RBI sets up panel to review ownership & corporate structure of Private sector banks

The Reserve Bank of India has constituted a five-member Internal Working Group to review the guidelines related to ownership, governance and corporate structure of private sector banks. In a press release, RBI informed that RBI Central Board Director P K Mohanty will head the committee, which will submit its report by September 30, 2020.

Accordingly, the Internal Working Group will examine and review the extant licensing and regulatory guidelines relating to ownership and control, promoters' holding, the requirement of dilution, control and voting rights, among others. The composition of the Working Group is as under:

• Dr Prasanna Kumar Mohanty, Director, Central Board of RBI
• Prof. Sachin Chaturvedi, Director Central Board of RBI
• Lily Vadera, Executive Director, RBI
• S. C. Murmu, Executive Director, RBI
• Shri Mohan Yadav, Chief General Manager, RBI - Convenor

The panel will also examine norms for promoter shareholding at the initial/licensing stage and subsequently, along with the timelines for dilution of the shareholding. RBI said it is necessary to align regulations to meet the requirements of a dynamic banking landscape as the macro-economic, financial market and technological developments continue to influence the future of banking.

The panel has also been asked to examine and review the eligibility criteria for individuals or entities to apply for a banking licence and make recommendations on all related issues.

The broad policy relating to ownership and control in Indian private sector banks is guided by the framework issued in February 2005.

Terms of Reference of the Committee are given below:

** To review the extant licensing guidelines and regulations relating to ownership and control in Indian private sector banks. It will also suggest appropriate norms, keeping in mind the issue of excessive concentration of ownership and control, and having regard to international practices as well as domestic requirements.

** To examine and review the eligibility criteria for individuals/ entities to apply for a banking license and make recommendations on all related issues.

** To study the current regulations on holding of financial subsidiaries through the non-operative financial holding company (NOFHC). At the same time, it will also suggest the manner of migrating all banks to a uniform regulation in the matter, including providing a transition path.

** To examine and review the norms for promoter shareholding at the initial/licensing stage and subsequently, along with the timelines for dilution of the shareholding.

**To identify any other issue germane to the subject matter and make recommendations thereon.

RBI in its notification said it felt that there is a need for a comprehensive review the extant guidelines on ownership, governance and corporate structure in private sector banks, taking into account key developments over the years which have a bearing on the issue.

The review would provide an opportunity to harmonise the norms applicable to banks set up at different periods, irrespective of their date of commencement of business.