Flexibility seen on stake guidelines: Poll

In a snap poll of 10 private bank CEOs, conducted by Business Standard at the Confederation of Indian Industry (CII) conference on the ownership of and governance in private banks in Mumbai, 90 per cent of bankers polled said that they expected the Reserve Bank of India (RBI) to be open to changing some of the crucial aspects of the draft guidelines.

But 10 per cent of private bank CEOs contacted by Business Standard did not emerge from the meeting elated. They were not hopeful of any change in the draft guidelines and admitted that they had put all their plans on hold until the ground realities became clearer.

About 33 per cent of bank chiefs felt the 10 per cent threshold limit on ownership imposed on a single entity or a group of related entities would be raised.

The RBI draft circular states that an entity or group of related entities can hold over a 10 per cent stake in a private bank only after a detailed due diligence by the regulator.

Another 33 per cent of CEOs were of the view that the 10 per cent threshold limit imposed on promoters' holdings would be raised.

As per the circular, a promoter can hold up to 10 per cent without much scrutiny but it can be raised higher only thorough checks and balances. The RBI will check the source of funding and continuity of funds and so on.

The remaining 24 per cent were not sure of the kind of changes to expect in the guidelines but were hopeful of less stringent norms all the same.

Still, most private bankers heaved a collective sigh of relief today after the RBI kicked off the first round of debate on the controversial draft guidelines on ownership of private banks.

The CEOs who were hopeful of changes felt that the central bank was very receptive and was for the first time engaging in an open debate of this fashion.

"Very few central banks around the world would engage in debate and discussions with the regulated entities over regulatory issues and policies," they said.

Uday Kotak, vice chairman and managing director, Kotak Mahindra Bank, pointed out at the conference, "I found a stark difference between the earlier circulars and the recent one. The draft guideline of July 2004 has no mention of the word `promoter'. Now the deputy governor has said that the promoter can hold 10 per cent, 30 per cent or even higher so long as he proves his credentials."