RBI on Promoter’s stake in Private Banks

RBI on Promoter’s stake in Private Banks

Team Ambitiousbaba and AB are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is “RBI on Promoter’s stake in Private Banks

The Reserve Bank of India (RBI) raised the cap on promoter’s stake to 26 per cent in the long run which is 15 percent currently in private banks.

The RBI has recognized 21 out of the 33 recommendations constituted by the internal working group – which was set up to review the guidelines on ownership and corporate structure for private sector banks. The central bank has made some partial adjustment where it believed it to be necessary.

This specification should be uniform for all types of promoters and would not entail that promoters, who have already reduced their holdings to below 26 per cent, will not be allowed to increase it to 26 per cent of the paid-up equity share capital of the bank.

The promoters can cut down their holdings below 26% after the five years of lock-in period.

The RBI’s internal working group has preferred for allowing promoters to maintain their share of holding in the first five years and then capping it at 26 per cent after 15 years of operations.

According to the current norms of central bank a promoter of a private bank required to trim holdings to 20 per cent within 10 years and 15 per cent within 15 years.

On the prescribed lock-in period for promoters’ initial shareholding, the central bank prefers no changes in guidelines. During the lock-in period, promoter’s shareholding may preserve as a minimum of 40 per cent of the paid-up voting equity share capital of the bank for the first five years.

Question & Answer:

Q1. What is the limit decided by RBI for promoters’ shareholding of private bank recently?

Ans. 26% (earlier it was 15%)

Q2. Within which year promote has to cut down his shareholding to 15%?

Ans. 15 years

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