Stalement in RBI, competition panel talks over bank M&As

Banking regulator Reserve Bank of India’s (RBI) attempts to keep anti-competitive practices watchdog Competition Commission of India (CCI) out of the merger and acquisition (M&A) business of banks seems to have hit a roadblock. The ministry of corporate affairs said it is not agreeable exempting the banking industry from the M&A norms that are expected to be put in place by CCI soon.

Protracted discussions between the finance and corporate affairs ministries, the two administrative ministries for RBI and CCI, respectively, to exempt bank M&As from the regulatory purview of CCI have failed to produce results, it is learnt.

The RBI view has been that the CCI, which has to approve bank M&As under the provisions of the Competition Act 2002, should keep away from scrutinising such M&A activities because RBI is the regulator for the banking industry.

Under the Competition Act, any bank merger has to get final approval from the CCI, although RBI’s views will be sought on the matter. RBI had observed that CCI’s involvement in clearing bank M&As will go against the spirit of the regulatory powers given to the central bank. Apparent lack of sufficient expertise was another reason cited to keep M&A regulation in the banking sector confined to RBI.

Bank M&As were not part of the Monopoly and Restrictive Trade Practices Act (MRTPC) which gave way to the new Competition Act later.

“The matter is still under discussion,” a senior official of the ministry of corporate affairs said, though he did not indicate any possibility of an early solution. Sources said a final call on the issue will be taken by the ministers concerned - Finance Minister Pranab Mukherjee and Corporate Affairs Minister Salman Khurshid – on account of the little progress in ministry-level talks. The overlap of regulatory powers among sector regulators and the CCI has been generating differing views ever since the Competition Act was notified. Insurance and telecom are other sectors in which potential differences could arise since they have sector regulators in the Insurance Regulatory and Development Authority and the Telecom Regulatory Authority of India . CCI intervention is triggered only on those M&A deals above a certain deal size. Either the combined entity formed by the M&A should have a combined asset value of over Rs 1,000 crore or $500 million or a turnover of Rs 3,000 crore or $1.5 billion.