The Reserve Bank of India had constituted an Internal Working Group (IWG) in June 2020 to review the extant ownership guidelines and corporate structure for Indian private sector banks. Refer to the statements given below and identify which od the following is/are the recommendations of th

Question

The Reserve Bank of India had constituted an Internal Working Group (IWG) in June 2020 to review the extant ownership guidelines and corporate structure for Indian private sector banks. Refer to the statements given below and identify which od the following is/are the recommendations of this IWG, as per its report submitted in Nov 2020. i. Large corporate/induses may be allowed as promoters of banks only after necessary amendments to the Banking Regulation Act, 1949 and strengthening of the supervisory mechanism for large conglomerates, including consolidated supervision. ii. For Payments Banks intending to convert to a Small Finance Bank, track record of 3 years of experience as Payments Bank may be considered as sufficient. iii. The cap on promoters' stake in the long run (15 years) may be raised from the current level of 15 per cent to 26 per cent of the paid-up voting equity share capital of the bank.

Accepted Answer

All of the above. The RBI IWG Nov 2020 report on private bank ownership recommended: (i) Allowing large corporates as bank promoters subject to Banking Regulation Act amendments and better conglomerate supervision. (ii) Payments Banks converting to SFBs need only 3 years of experience (reduced track record). (iii) Long-run promoter stake cap raised from 15% to 26%. All three are correct recommendations.

Solution

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