RBI allows more foreign stake in private sector banks

The Reserve Bank of India has allowed foreign banks higher shareholding in private sector lenders in the country under exceptional situations as it tweaked the guidelines, against the backdrop of norms on licensing of new banks. With the changes, regulated, well-diversified, listed and government-run foreign financial institutions will be allowed to own as much as 40 percent of a private sector bank. [caption id=“attachment_2767792” align=“alignleft” width=“380”]  Reuters[/caption] The ownership of non-regulated and non-diversified financial institutions will be capped at 15 percent, the RBI said in a document posted on its website on Thursday. Foreign banks operating in India can continue to acquire up to 10 percent of the investee bank’s equity capital but in exceptional circumstances such as restructuring or weak banks or in the interest of consolidation in the banking sector, the RBI may permit a higher level of shareholding, it said. “The guidelines have been reviewed against the background of … licensing of new banks in the private sector … the need for additional capital for the banks consequent to the implementation of Basel III capital regulations and to rationalise the ownership limits,” the RBI said. The voting rights will be capped at the current level of 15 per cent, the central bank said. The central bank last year issued two new bank permits in what was India’s first bank licensing process in a decade. This month it published draft guidelines for licensing of more banks.