Promoters of new banks likely to have 20 percent stake
By siliconindia   |   Thursday, 12 August 2010, 22:15 IST
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Mumbai: The Reserve Bank of India (RBI) has released a discussion paper on entry of new banks in the private sector, saying that promoters of new banks in both private sector (industrial and business houses) and non-banking finance companies may be allowed shareholding of upto 20 percent. With the general threshold for shareholders at 5 percent, the same could be raised to 20 percent for promoters and other significant shareholders, said RBI suggesting on minimum and maximum caps on shareholding. Under the current guidelines, although promoters are allowed higher stake, they need to divest their shareholding to 10 percent within a specified time frame. Individuals and business houses engaged in real estate activities are not allowed to get licenses for setting up new banks, the paper indicates. In order to ensure Indian ownership for the banks, the paper suggests that the foreign investment including FDI, NRI, FII in new banks could be kept at a level below 50 percent. It also suggests that the investments can be locked at that level for the initial 10 years. Regarding permitting industrial and business houses to float banks, the central bank said they could be allowed to takeover regional rural banks as an intermediate step before considering allowing them to set up banks. RBI will frame detailed guidelines for licensing of new banks and invite applications for setting up new banks, based on the feedback received on the possible approaches discussed in this paper. An external group will examine the applications and will make recommendations to the RBI.

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