Central bank sets up panel to review ownership of pvt lenders
The Reserve Bank of India (RBI) on Friday said it has constituted an internal working group to review the existing guidelines on ownership and corporate structure of private sector banks. The group will be headed by RBI executive director PK Mohanty. “Though the overarching principles that the ownership and control of private sector banks should be well diversified and that the major shareholders are ‘fit and proper’ have remained unchanged, the specific contours have evolved over the years with specific prescriptions being given as part of licensing guidelines issued at various points in the past. It is, therefore, felt necessary to comprehensively review the extant guidelines on ownership, governance and corporate structure in private sector banks, taking into account key developments which have a bearing on the issue,” RBI said.
The group will examine the existing licensing guidelines and regulations on ownership and control of private sector banks. It will also suggest appropriate norms, keeping in mind the issue of excessive concentration of ownership and control. Besides, it will examine and review the eligibility criteria for individuals or entities to apply for a banking license, and review the promoter shareholding norms at the initial licensing stage.
It will also study the current regulations on holding of financial subsidiaries through a nonoperative financial holding company (NOFHC) and suggest steps to migrate all banks to a uniform regulation.
The need to examine the current guidelines on ownership comes after large shareholders of private sector banks sought RBI’S permission to raise their stakes beyond the permitted 15%. Top on the list were the Hindujas, promoters of Indusind Bank, who wanted to increase their stakes in the bank.
The Hindujas’ move followed the RBI’S decision to allow Uday Kotak to bring down his stake to 26% by August, and further reduce his stake over a period of time.
Kotak had a prolonged disagreement with RBI over his personal holding in the private lender. The bank licensing rules mandated that a private bank’s promoter will need to pare holding to 40% within three years, 20% in 10 years and to 15% in 15 years. The rules on promoter holding have changed over the years.
Banks are of the view that interest on loans cannot be waived for the six months of the repayment moratorium allowed by the central bank, State Bank of India (SBI) told the Supreme Court on Friday.
SBI’S statement came in an intervention application it filed on Friday in a plea seeking a waiver on interest charges during the course of the moratorium on loan repayments given by banks amid the nationwide lockdown.
The apex court directed the Centre to file a detailed reply in three days and scheduled the case for hearing on 17 June.
A bench comprising justices Ashok Bhushan, S.K. Kaul and M.R. Shah also took on record solicitor general Tushar Mehta’s submission that the government will hold a meeting with the finance ministry and RBI on the weekend to discuss this issue.
“Our concern in these proceedings is only whether the interest that has been deferred for three months will be added to charges payable later and whether there will be interest on the interest,” the judges said.
“We are doing balancing. The only thing we are wanting is a wider measure.”
“Whether the payment will impose interest on interest or not”, is the answer the court said it wants in the response to be filed in three days.
RBI on 22 May extended the moratorium allowed on term loans till 31 August. In March, it allowed a three-month moratorium on payment of all term loans due between 1 March and 31 May.
Gajendra Sharma, the petitioner seeking the waiver on interest, argued that without a waiver the interest would keep piling up during the moratorium, and this ultimately would have to be paid by the borrower.