RBI in silence over corporate entry in banks

The Reserve Bank of India has kept in abeyance the entry of industrial houses into full fledged commercial banking even as it accepted 21 of the 33 recommendations of an internal working group, dashing hopes of the Tatas and Birlas to add banking to their sprawling business empires.

While it did not explicitly say that the proposal for industrial houses to own banks that faced criticism from former central bankers to politicians, have been rejected, it said the other 12 proposals were under consideration. It doubled minimum capital to Rs. 1,000 crores and permitted promoters to own as much as 26 percent by the   promoters comforting billionaire    Uday Kotak to retain control over his bank.

Industrial houses such as Tatas and Birlas which run large Non-Banking Finance Companies face a double whammy as the central bank has declared it would tighten the rules governing big NBFCs to be as stringent as it is for banks. It junked the proposal that recommended allowing conversion of payment banks to small finance banks in 3 years, delaying Paytm’s entry into lending and other banking activities.

“After examining the comments and suggestions received from the stakeholders and members of the public, it has been decided to accept 21 recommendations, the remaining recommendations are under examination,” the RBI said in a statement. “The cap on promoters’ stake in long run of 15 years may be raised from the current levels of 15 per cent to 26 per cent of the paid-up voting equity share capital of the bank,” the RBI said.

Though, promoters who have already diluted their holdings to below 26 per cent, will not be permitted to raise it to 26 per cent of the paid-up voting equity share capital of the bank. The regulator added that the promoters, can choose to bring down holding to below 26 per cent, any time after the initial lock- in period of five years.