Ceiling on voting rights in private banks to go
By Our Banking Bureau | 01 Mar 2005
Mumbai: The finance ministry has proposed lifting the 10 per cent ceiling on voting rights to facilitate foreign banks to acquire a majority stake in Indian private banks.
According to an RBI press release issued yesterday, foreign banks "would be allowed to acquire a controlling stake in Indian private banks in a phased manner," in the first phase (March 2005 to March 2009) of the banking roadmap,
The RBI "will take into account the standing and reputation of the foreign bank, globally as well as in India, and the desired level and nature of presence of the foreign bank in India. RBI may, if it is satisfied that such investment by the foreign bank concerned will be in the long-term interest of all the stakeholders in the investee bank, permit acquisition of such percentage as it may deem fit," the release adds.
"The RBI may also specify, if necessary, that the investor bank shall make a minimum acquisition of 15 per cent or more and may also specify the period of time for such acquisition. The overall limit of 74 per cent will be applicable," it added.
In the second phase (April 2009 onwards), the wholly owned subsidiaries of foreign banks will be allowed to list and dilute their stake to 74 per cent with Indian residents holding 26 per cent. The dilution could be through either an IPO or an offer for sale.
The wholly-owned subsidiary (WOS) will have a minimum capital requirement of Rs300 crore.
The WOS will be treated on a par with the existing branches of foreign banks for branch expansion with flexibility to go beyond the existing WTO commitments of 12 branches in a year and preference for branch expansion in under-banked areas.
 | Click to view full report |
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| | Annex for setting up of wholly owned banking subsidiaries |
| | Guidelines on ownership and governance in private sector banks |
