Money & Banking

RBI sets up panel to review norms on ownership, corporate structure of private banks

?OUR BUREAU Mumbai | Updated on June 12, 2020 Published on June 12, 2020

The Reserve Bank of India (RBI) has set up an internal working group (IWG) to comprehensively review the extant guidelines on ownership, governance and corporate structure in private sector banks, taking into account the key developments over the years that have a bearing on the issue.

The five-member group, headed by RBI Central Board Director Prasanna Kumar Mohanty, will 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.

The formation of the IWG comes on the heels of the central bankfloating a discussion paper on ‘Governance in Commercial Banks in India’ on Thursday. This paper suggested limiting the tenure of a promoter and whole-time director/ CEO of a bank to 10 years and requires bank boards to put in place a formal written ‘conflicts of interest’ policy, among others.

The RBI, in a statement, said the group will examine and review the extant licensing and regulatory guidelines related to ownership and control, promoters’ holding, requirement of dilution, control and voting rights.

Eligibility criteria

As per the terms of reference, the IWG will examine and review the eligibility criteria for individuals/ entities to apply for banking licence and make recommendations on all related issues.

The group will study the current regulations on holding of financial subsidiaries through non-operative financial holding company (NOFHC) and suggest the manner of migrating all banks to a uniform regulation in the matter, including providing a transition path.

The IWG will examine and review the norms for promoter shareholding at the initial/licensing stage and subsequently along with the timelines for dilution of the shareholding.

The RBI said the review would provide an opportunity to harmonise the norms applicable to banks set up at different time periods, irrespective of their date of commencement of business. The group will submit its report by September 30.

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Published on June 12, 2020
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