RBI releases the Report of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks.

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The Reserve Bank of India vide its notification dated 20th November 2020 has released a report on the internal working group (IWG) recommendations on private bank ownership and corporate structure.

The key recommendations of the IWG are as follows:

The report recommends promoter stake cap in long run (15 years) be raised to 26 percent from 15 percent if paid-up voting equity share capital.

The minimum initial capital requirement for licensing new banks to be enhanced from ₹500 crore to ₹1000 crore for universal banks, and from ₹200 crore to ₹300 crore for small finance banks.

For Payments Banks intending to convert to a Small Finance Bank, track record of 3 years of experience as Payments Bank may be considered as sufficient.

Small Finance Banks and Payments Banks may be listed within ‘6 years from the date of reaching net worth equivalent to prevalent entry capital requirement prescribed for universal banks’ or ‘10 years from the date of commencement of operations’, whichever is earlier.

Non-operative Financial Holding Company (NOFHC) should continue to be the preferred structure for all new licenses to be issued for universal banks. However, it should be mandatory only in cases where the individual promoters / promoting entities/ converting entities have other group entities.

Banks currently under the NOFHC structure may be allowed to exit from such a structure if they do not have other group entities in their fold.

The RBI has invited comments from the stakeholders and members of the public on the above report which may be submitted by January 15, 2021 through email.

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