Private bank promoters’ stake holding cap raised to 26% from 15%
- November 27, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Private bank promoters’ stake holding cap raised to 26% from 15%
Context:
The Reserve Bank of India has raised the stake promoters can hold in their banks to 26 per cent from 15 per cent now. The RBI has also given small finance banks (SFBs) more time to list as part of its move to align regulations to meet the requirements of a dynamic banking landscape.
Background:
These are part of 21 recommendations of an Internal Working Group (IWG) that have been accepted by the RBI, with modifications. The IWG had made 33 recommendations. The central bank said the remaining 12 are under examination. The hot button issue of allowing large corporates/industrial houses to promote banks, as proposed by the IWG, did not find mention.
Concept:
Indian Banks ( scheduled) are grouped into four major sections, which are:
- Commercial Banks: These banks are further categorized into four categories-
- Private Sector Banks
- Public Sector Banks
- Regional rural banks
- Foreign banks
- Small Finance Banks
- Payments Banks
- Co-operative Banks
Private Banks:
These are the banks in which the maximum stake of shares or equity is maintained and owned by private individuals. Initially, the Indian bank sector was dominated by the Public Sector banks, but after the 1990s, private sector banks came into existence and have grown immensely.
In India, private sector banks are classified into two divisions
- Old Private sector banks (these banks emerged before 1968)
- New Private sector banks (these banks emerged after the 1990s)
Narasimham Committee advocated for more private banks during 1990s.