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'Timely And Bold': Hinduja Group's Ashok Hinduja Welcomes RBI Report On Private Bank Ownership

Hinduja opined that IWG's report rightfully puts a greater onus on the promoter shareholders to exercise oversight through a higher shareholding limit of 26 percent, with commensurate voting rights.

Nov 22, 2020 / 04:14 PM IST

Two days after the Reserve Bank of India released a report on the internal working group (IWG) recommendations on private bank ownership and corporate structure, Hinduja Group's Chairman Ashok Hinduja lauded the IWG for taking a timely and bold stand.

"The Working Group has taken a timely and bold stand by proposing a uniform regulatory framework for the entire banking system, dispensing with the regulatory arbitrage available between banks, NBFCs, small finance banks and payment banks," Ashok Hinduja said in his statement.

RBI releases panel report on ownership, governance norms of private banks

Point out 'one nation, one banking framework', Hinduja stated, "Like, in many other fields, we should have One Nation, One Banking Framework if we are to move towards releasing our aspiration to be a 5 trillion $ economy. Solid banking apparatus is a must."

He believed that IWG's report rightfully puts a greater onus on the promoter shareholders to exercise oversight through a higher shareholding limit of 26 percent, with commensurate voting rights.

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Hinduja even noted 'supervisory stance for large conglomerates, including consolidated supervision will ensure the necessary check and balance in the system'.

However, he stroke a note of caution. "Ring-fencing the banking system from a myriad of emerging risks has to be a constant endeavour, and I am certain that Reserve Bank of India will exercise a continuous vigil as it has done in the past," Hinduja group chairman said.

Lauding RBI, Ashok Hinduja hoped that the apex bank will be able to implement the guidelines within a specific time frame.

Earlier on Friday, RBI's IWG recommended large corporate/industrial houses 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.

The IWG in its recommendations had also said that promoter stake cap in long run -- 15 years -- be raised to 26 percent from 15 percent if paid-up voting equity share capital. Adding, non-promoter shareholding may be capped at 15 percent of paid-up voting equity share capital for all shareholders.

RBI had also said, "Large Non-banking Finance Companies (NBFCs), with an asset size of Rs 50,000 crore and above, may be considered for conversion into banks subject to completion of 10 years of operations."

Among other things, IWG had recommended that Non-operative Financial Holding Company (NOFHC) should continue to be the preferred structure for all new licenses to be issued for universal banks.
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