Business Standard

Both CCI and RBI To Vet M&As In Banking

While CCI will see competition part of such deals, the RBI will see prudential aspects

Sushmi Dey  |  New Delhi 

Unlike other sectors, (M&As) in the banking space may have to seek clearance from both fair market watchdog—the Competition Commission of India (CCI) and sectoral regulator--the Reserve Bank of India. The earlier impression was that only involuntary mergers and acquisitions, the ones which are directed by the RBI, will come to the central bank along with CCI.

However, all may now come under both the watchdogs. While will see competition part of such deals, the will see prudential aspects.

"For M&A activities, they (banks) will have to seek Reserve Bank approval from prudential point of view. is the sectoral regulator so the health of banks is the concern of the RBI, health of banks is not CCI’s concern, CCI’s concern is their behavior in the market and the consumer in the market," a key official told Business Standard.

So the concerned banks have to go to the for mergers as they go for branches and other activities and it will look at technical issues related to the sector, he said.

However, as per the proposed provision in the amendment to the Competition Act they will also have to seek approval from the for M&A activities.



The Cabinet recently cleared amendment to the Act to clear air over who would vet  the merger and acquisition activities. It brought all M&A activities under CCI, except for amalgamation of a failed bank with another bank.

That time, the impression was that only involuntary merger will be required to be vetted by both and CCI. However, now the official explained that even voluntary deals will have to be cleared by both and RBI.

According to CUTS International secretary general Pradeep S Mehta, it could be difficult for both the regulators to co-exist and the if the amendments to the Competition Act goes through, the government is likely to make amendments to the Banking Law Bill to take out provision of approval for competition related issues.

“The proposed amendments to the Competition Act would in any case make it mandatory for both regulators to consult each other in case there is any conflict. It also provides the primacy to regulate M&As, so it will have a clear say in across sectors including banking,” Mehta said.

Earlier, Banking Laws (Amendment) Bill, 2011 had proposed that mergers and acquisition in the banking sector would be exempted from the purview of CCI.

"It is proposed to insert a new section 2A  in the Banking Regulation Act, 1949 so as to exempt mergers of the banking companies from the applicability of the provisions of the Competition Act," the bill had proposed.

This proposed clause will now be either taken away or suitably amended, those in know of the development said.

Indian banking system, particularly public sector banks have not seen much consolidation despite the government urging banks for that for  years.

In the post-1993 period, the first such acquisition happened when Times Bank was acquired by HDFC Bank and then ICICI Bank took over Bank of Madura.

Subsequently, Lord Krishna Bank merged with Centurion Bank of Punjab. Then, SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008. State Bank of Indore was merged with SBI in 2010. In 2010 again, Bank of Rajasthan merged with ICICI Bank.

So far as involuntary merger was concerned, OBC amalgamated Global Trust Bank in 2004, after the had imposed a moratorium on the operations of the bank promoted by Ramesh Gelli.

RECOMMENDED FOR YOU

Both CCI and RBI To Vet M&As In Banking

While CCI will see competition part of such deals, the RBI will see prudential aspects

Unlike other sectors, mergers and acquisitions (M&As) in the banking space may have to seek clearance from both fair market watchdog—the Competition Commission of India (CCI) and sectoral regulator--the Reserve Bank of India. The earlier impression was that only involuntary mergers and acquisitions, the ones which are directed by the RBI, will come to the central bank along with CCI.

Unlike other sectors, (M&As) in the banking space may have to seek clearance from both fair market watchdog—the Competition Commission of India (CCI) and sectoral regulator--the Reserve Bank of India. The earlier impression was that only involuntary mergers and acquisitions, the ones which are directed by the RBI, will come to the central bank along with CCI.

However, all may now come under both the watchdogs. While will see competition part of such deals, the will see prudential aspects.

"For M&A activities, they (banks) will have to seek Reserve Bank approval from prudential point of view. is the sectoral regulator so the health of banks is the concern of the RBI, health of banks is not CCI’s concern, CCI’s concern is their behavior in the market and the consumer in the market," a key official told Business Standard.

So the concerned banks have to go to the for mergers as they go for branches and other activities and it will look at technical issues related to the sector, he said.

However, as per the proposed provision in the amendment to the Competition Act they will also have to seek approval from the for M&A activities.

The Cabinet recently cleared amendment to the Act to clear air over who would vet  the merger and acquisition activities. It brought all M&A activities under CCI, except for amalgamation of a failed bank with another bank.

That time, the impression was that only involuntary merger will be required to be vetted by both and CCI. However, now the official explained that even voluntary deals will have to be cleared by both and RBI.

According to CUTS International secretary general Pradeep S Mehta, it could be difficult for both the regulators to co-exist and the if the amendments to the Competition Act goes through, the government is likely to make amendments to the Banking Law Bill to take out provision of approval for competition related issues.

“The proposed amendments to the Competition Act would in any case make it mandatory for both regulators to consult each other in case there is any conflict. It also provides the primacy to regulate M&As, so it will have a clear say in across sectors including banking,” Mehta said.

Earlier, Banking Laws (Amendment) Bill, 2011 had proposed that mergers and acquisition in the banking sector would be exempted from the purview of CCI.

"It is proposed to insert a new section 2A  in the Banking Regulation Act, 1949 so as to exempt mergers of the banking companies from the applicability of the provisions of the Competition Act," the bill had proposed.

This proposed clause will now be either taken away or suitably amended, those in know of the development said.

Indian banking system, particularly public sector banks have not seen much consolidation despite the government urging banks for that for  years.

In the post-1993 period, the first such acquisition happened when Times Bank was acquired by HDFC Bank and then ICICI Bank took over Bank of Madura.

Subsequently, Lord Krishna Bank merged with Centurion Bank of Punjab. Then, SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008. State Bank of Indore was merged with SBI in 2010. In 2010 again, Bank of Rajasthan merged with ICICI Bank.

So far as involuntary merger was concerned, OBC amalgamated Global Trust Bank in 2004, after the had imposed a moratorium on the operations of the bank promoted by Ramesh Gelli.

image
Business Standard
177 22

Both CCI and RBI To Vet M&As In Banking

While CCI will see competition part of such deals, the RBI will see prudential aspects

Unlike other sectors, (M&As) in the banking space may have to seek clearance from both fair market watchdog—the Competition Commission of India (CCI) and sectoral regulator--the Reserve Bank of India. The earlier impression was that only involuntary mergers and acquisitions, the ones which are directed by the RBI, will come to the central bank along with CCI.

However, all may now come under both the watchdogs. While will see competition part of such deals, the will see prudential aspects.

"For M&A activities, they (banks) will have to seek Reserve Bank approval from prudential point of view. is the sectoral regulator so the health of banks is the concern of the RBI, health of banks is not CCI’s concern, CCI’s concern is their behavior in the market and the consumer in the market," a key official told Business Standard.

So the concerned banks have to go to the for mergers as they go for branches and other activities and it will look at technical issues related to the sector, he said.

However, as per the proposed provision in the amendment to the Competition Act they will also have to seek approval from the for M&A activities.

The Cabinet recently cleared amendment to the Act to clear air over who would vet  the merger and acquisition activities. It brought all M&A activities under CCI, except for amalgamation of a failed bank with another bank.

That time, the impression was that only involuntary merger will be required to be vetted by both and CCI. However, now the official explained that even voluntary deals will have to be cleared by both and RBI.

According to CUTS International secretary general Pradeep S Mehta, it could be difficult for both the regulators to co-exist and the if the amendments to the Competition Act goes through, the government is likely to make amendments to the Banking Law Bill to take out provision of approval for competition related issues.

“The proposed amendments to the Competition Act would in any case make it mandatory for both regulators to consult each other in case there is any conflict. It also provides the primacy to regulate M&As, so it will have a clear say in across sectors including banking,” Mehta said.

Earlier, Banking Laws (Amendment) Bill, 2011 had proposed that mergers and acquisition in the banking sector would be exempted from the purview of CCI.

"It is proposed to insert a new section 2A  in the Banking Regulation Act, 1949 so as to exempt mergers of the banking companies from the applicability of the provisions of the Competition Act," the bill had proposed.

This proposed clause will now be either taken away or suitably amended, those in know of the development said.

Indian banking system, particularly public sector banks have not seen much consolidation despite the government urging banks for that for  years.

In the post-1993 period, the first such acquisition happened when Times Bank was acquired by HDFC Bank and then ICICI Bank took over Bank of Madura.

Subsequently, Lord Krishna Bank merged with Centurion Bank of Punjab. Then, SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008. State Bank of Indore was merged with SBI in 2010. In 2010 again, Bank of Rajasthan merged with ICICI Bank.

So far as involuntary merger was concerned, OBC amalgamated Global Trust Bank in 2004, after the had imposed a moratorium on the operations of the bank promoted by Ramesh Gelli.

image
Business Standard
177 22

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard