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RBI Internal Working Group’s suggestion: Big business houses may soon promote banks

RBI Internal Working Group’s suggestion: Big business houses may soon promote banks

In a significant shift of stance, large corporates and conglomerates could own banks if the suggestions of an internal working group (IWG) constituted by the Reserve Bank of India (RBI) are accepted. The IWG recommends sweeping changes and easier rules that could altogether alter the Indian banking landscape with the presence of many more banks of all hues.

For instance, large, well-run non-banking finance companies (NBFCs), with an asset size of Rs 50,000 crore and above could become banks post 10 years of operations once they pass the due exercise. These could be owned by a corporate house so a Bajaj Finance, L&T Financial Holdings or an M&M Financial could make the cut.

Many NBFCs have been keen to turn into banks as it would give them access to cheap CASA deposits even if meeting statutory ratios are initially expensive. For its part, RBI may prefer NBFCs become banks as they could then be better regulated and subject to more regulations.

A final stake of 26%, as the IWG suggests, up from the current 15% could be a sweetener. If accepted, it would standardise the relaxation given to Uday Kotak, promoter of Kotak Mahindra Bank, earlier this year. For non-promoter shareholders, a uniform cap of 15% has been prescribed

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