The RBI’s vision of a uniform licence regime for the banking sector was proposed in a panel report on Tuesday that recommended a one-licence policy for all banks , irrespective of the ownership pattern. This will include all public sector, private sector (old and new) and foreign banks operating in India.

“Such a licensing regime would also involve uniform investment limits across investor categories, irrespective of ownership. Other than the Government’s own controlling stake, all other investment limits recommended for private sector banks should also thereby be applicable to public sector banks,” RBI said in its committee report.

This was first suggested by the banking regulator in a discussion paper in 2013.

This will facilitate larger pools of capital coming into the nationalised banks and assist in improving market valuations. “For distressed public sector banks, it provides the Government with another financing option through the induction of private equity with board representation, a partnership which could also help improve board governance,” the RBI said.

It says that even foreign banks in India would now get national treatment as the RBI has proposed to bring all banks under the same license.

“…with a caveat that the lack of reciprocity between India and other regulatory jurisdictions would permit RBI to impose constraints, or even deny licences, to specific foreign banks. Where no such reciprocity constraints exist, however, a one-licence policy embracing foreign-owned banks would provide them with national treatment,” the RBI said.

(This article was published on May 14, 2014)
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