RBI reviewing bank ownership structure, says Governor Sanjay Malhotra

RBI Governor Sanjay Malhotra says the central bank is examining bank ownership structure and eligibility norms for licensing to meet the growing needs of an expanding economy

The Reserve Bank of India (RBI) is reviewing the ownership structure and eligibility criteria for bank licensing as the expanding economy calls for more banks in the country, Governor Sanjay Malhotra said on Friday.

 

“An ordinary person trusts their money with the banks. It is important to have a trustworthy person, owner and manager in the bank. What kind of eligibility criteria should we have for that? What kind of conditions should we have? We should talk to everyone about it. Our economy is growing. We need more banks. Keeping that in mind, if there is a need for change, it will be done,” Malhotra said at the post-monetary policy press conference.

 

 

His remarks come amid speculation that the RBI might consider changes in guidelines that would allow foreigners to own more stake in Indian banks.

 

While foreign investors, including portfolio investors, can own up to 74 per cent in Indian banks, regulations cap a strategic foreign investor’s stake at 15 per cent. Any holding above 5 per cent requires RBI’s prior approval. Also, there is a 26 per cent cap on voting rights by any large shareholding by a promoter or a strategic investor.

 

“We allow 15 per cent for non-residents. But on a case-to-case basis, it can go above 15 per cent. There is no immediate change in that, “Malhotra said. 

 

In the recent past, the RBI has allowed Fairfax to acquire 51 per cent in Catholic Syrian Bank.

 

Recently, Japan based Sumitomo Mitsui Banking Corporation (SMBC) proposed to buy a 20 per cent stake in Yes Bank from State Bank of India and seven private banks, who had invested in Yes Bank during its reconstruction in March 2020, for ₹13,482 crore.

 

Additionally, reports suggest Dubai-headquartered Emirates NBD Bank PJSC, which got RBI approval to establish a wholly owned subsidiary (WoS) in India, is eyeing a majority stake in IDBI Bank. The government has started the process of disinvestment of IDBI Bank. The government is offering a 30.48 per cent stake, while Life Insurance Corporation will sell a 30.24 per cent stake. The RBI is currently evaluating the fit and proper criteria of the investors.

 

Responding to a question on applications from small finance banks seeking conversion into universal banks, Malhotra said there was no timeline for a decision, but work is in progress on the applications received.

 

“I do not think there is a timeline. But it does not mean that we do not have an internal timeline. Work is in progress in all the applications that have come to us. We have already articulated a decision on one of them, which we have rejected,” he said.

 

AU Small Finance Bank and Ujjivan Small Finance have applied to the RBI for converting into a universal bank. Jana Small Finance was also looking to apply to the RBI for the same. 

 

RBI rejects Annapurna Finance’s application to set up universal bank

 

The Reserve Bank of India (RBI) on Friday rejected Bhubaneswar-based Annapurna Finance’s application to set up a universal bank. It had applied for a universal banking license back in January 2023.

 

“The RBI has completed the examination of Annapurna Finance Private Limited’s application for setting up a universal bank. Based on the assessment of the application according to the procedure laid down under extant guidelines, the applicant was not found suitable for granting of in-principle approval to set up a universal bank,” the central bank said in a statement.

 

Established in 2009, Annapurna Finance is among the top 10 NBFC-MFIs in the country. It provides microcredit for mostly income-generating activities to women using the group lending model. It also offers other products such as individual loans to provide financial assistance to the micro, small and medium enterprise (MSME) segment, home and home improvement loans, consumer durable loans, etc.