Cross-holding limit for all banks at 5 per cent

Mumbai: The Reserve Bank of India (RBI) on Tuesday tightened the cross-holding rules of the entire banking industry, including public sector banks and financial institutions.

It said no bank and financial institution should acquire more than a 5 per cent stake in another bank's equity. Releasing fresh prudential norms on capital adequacy and cross-holding of capital among banks and financial institutions, the banking industry's regulator said, "Banks and financial institutions should not acquire any fresh stake in a bank's equity shares, if by such acquisition the investing bank's/FI's holding exceeds 5 per cent of the investee bank's equity capital."

It also said banks and institutions, which hold more than the stipulated limit, should apply to it within 45 days, along with a definite road map for reducing their exposure to the prudential limits.

An RBI spokesperson, however, clarified that the new rule would not apply to the State Bank of India, which holds more than 90 per cent of the equity of its seven associate banks.