RBI tweaks shareholding norms for private sector banks

The Reserve Bank today issued new guidelines on ownership in private sector banks by bundling shareholding patterns into two broad categories of individuals (natural persons) and legal entities/institutions, but retained the cap on foreign ownership at 74 per cent.
The new norms, which envisage diversified shareholding in private sector banks by a single entity/corporate entity/group of related entities, are aimed at helping them meet the additional capital under the Basel-III regulations and to rationalise the ownership limits, the RBI said.
Bundling the ownership limits for all shareholders into two broad categories of natural persons (individuals) and legal persons (entities/institutions), the RBI has stipulated separate limits for non-financial and financial institutions, which have been divvied into diversified and non-diversified institutions.

"For all existing banks, the permitted promoter/promoter group shareholding will be in line with what has been permitted in the February 22, 2013 guidelines on licensing of universal banks at 15 per cent," it said.
In case any promoter/promoter group is eligible for higher shareholding as per the licensing guidelines, the same will apply and the limits prescribed for all shareholders in the long run will not apply.
"In case of financial institutions that are owned to the extent of 50 per cent or more or controlled by individuals, the shareholding would be deemed to be by a natural person and the shareholding will be capped at 10 per cent," RBI said.

Under the new norms, the RBI has retained the provision of seeking its prior mandate if someone wants to increase shareholding/voting rights to 5 per cent or more.
Similarly, it said the 'fit and proper' criterion for acquisition of shareholding in a private bank beyond 5 per cent will continue to apply.