The financial regulator RBI has formed an internal working group to review the ownership guidelines and corporate structure for the private banks. The group constituted will review the key developments over the years that have a bearing on the issue of ownership.
It is expected to analyze all the norms that are applicable to the banks, that were set at different terms, irrespective of the date of commencement.
The working group will constitute of 5 members working along with RBI- Directors of the central board Prasanna Kumar Mohanty and Sachin Chaturvedi, Executive directors Lily Vadera and SC Murmu, and chief general manager Shrimohan Yadav.
Keeping in mind the excessive concentration of ownership and control the members will be suggesting appropriate norms to the banks in regards to both domestic as well as the international practices.
This review by RBI is a measure to prevent any more banks from coming under the scrutiny of courts with respect to the ownership norms as faced by Kotak Mahindra and Bandhan Bank earlier. As per the current norms, private banks’ promoter must bring down his share to 40% within 3 years of its launch. Later it must be reduced to 20% within 10 years and 15% within 15years.
The committee will also be reviewing all the eligibility criteria for such private entities applying for banking licenses and also provide recommendations for the same. The banking sector has already been impacted due to the lockdown especially in regards to the loans segment.