MUMBAI: In a move that could reshape India’s banking landscape, the Reserve Bank of India (RBI) is re-examining the country’s bank ownership norms and licensing criteria — a potential overhaul that may open the door to more foreign and domestic players.
RBI is also keen to tightens the definition of who is “fit and proper” to own or manage a bank.
“We are reviewing what kind of person or entity should be allowed to own and run a bank – someone the average depositor can trust,” RBI Governor Sanjay Malhotra said on Friday, speaking at the post-policy press briefing. “Our economy is growing. We need more banks. If that calls for change, change will come.”
Malhotra’s remarks come at a time of heightened global interest in Indian banks and amid speculation that the RBI could loosen bank ownership caps for foreign investors, particularly strategic ones.
Foreign ownership
Currently, while foreign investors (including portfolio investors) can own up to 74 per cent, strategic foreign investors are capped at 15 per cent, with voting rights restricted to 26 per cent – and anything beyond 5 per cent requiring RBI nod.
“There is no immediate change,” Malhotra clarified. “But we do permit ownership above 15 per cent on a case-by-case basis.”
The RBI’s openness to reviewing these norms comes against the backdrop of deals like Fairfax’s 51 per cent stake in Catholic Syrian Bank (now CSB Bank), Sumitomo Mitsui’s proposed 20 per cent% buyout in Yes Bank, and Emirates NBD’s interest in acquiring a controlling stake in IDBI Bank – part of the government’s disinvestment process.
SFBs seek universal bank licence
Separately, Malhotra confirmed that the RBI is evaluating multiple applications from small finance banks seeking conversion to universal banks – with some already rejected, including Annapurna Finance’s application.
This reassessment marks a critical juncture for India’s financial sector as the RBI walks a fine line between encouraging capital inflow and ensuring only reputable entities helm its banks.
