Dec 30, 2018

Clamour Grows for Review of RBI’s Ownership Rules for Private Banks as Kotak Deadline Approaches

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As an RBI deadline ends on Monday for Kotak Mahindra Bank to reduce promoters’ stake, clamour has increased for a review of the central bank’s ownership guidelines for the country’s private sector lenders.

The Centre for Economic Policy Research (CEPR), a right-leaning think tank, has said in a new report that it is high time for a review of regulations and legislations and for re-working the model of governance and ownership norms for Indian private sector banks.

Recently, the Swadeshi Jagaran Manch (SJM) had also said there was an urgent need for a rethink on the regulatory framework for private bank ownership so that it remains in Indian hands.

“None of us want Indian homegrown banks to go into hands of foreign players,” the SJM had said.

The CEPR said the objective should be to form regulations that leads to creation of global giants like JP Morgan, Merrill Lynch, Goldman Sachs and Santander within India.

It said these global giants were set up by families or individuals who diluted promoter stakes as a natural corollary to their success, growth and eventual scale over a period.

Only such an enabling environment will help well-run banks such as HDFC Bank and Kotak Mahindra Bank reach a global scale that serves India’s interests as the world’s fastest growing large economy, the think-tank added.

Leading corporate legal firm Corporate Professionals’ founder Pavan Kumar Vijay said there is a need to increase competition in the banking space and that calls for a review of the ownership guidelines, which have been a cause for non-participation to obtain license.

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