RBI sets up panel to review corporate structure of private sector banks

The Reserve Bank of India (RBI) on Friday said it has constituted an internal working group to review the guidelines on the ownership and corporate structure for private sector banks.  

“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 central bank said in a statement. 

The RBI said it was doing so to align regulations to meet the requirements of a dynamic banking landscape, which is changing continuously because of macroeconomic, financial market, and technological developments.  

“Though the overarching principle that the ownership and control of private sector banks should be well-diversified and that major shareholders are ‘fit and proper’ has 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,” the central bank said.  

Therefore, it is necessary to comprehensively review the extant guidelines on ownership, governance, and corporate structure in private sector banks, it stated.  

The internal group will examine and review the extant licensing and regulatory guidelines relating to ownership and control, promoters’ holding, requirement of dilution, control and voting rights, etc.  

The group comprises Prasanna Kumar Mohanty and Sachin Chaturvedi (both directors, Central Board of the RBI), Lily Vadera, and S C Murmu (both executive directors), and Shrimohan Yadav (chief general manager of the RBI). 

The announcement came a day after the central bank released a draft paper stating that promoter or major shareholder of a bank cannot hold the post of CEO or whole-time director for more than 10 years.