RBI changes Shareholding norms for Private Sector Banks

The Reserve Bank of India issued new guidelines on ownership in private sector banks by bundling shareholding patterns into two broad categories of individuals (natural persons) and legal entities/institutions, but retained the cap on foreign ownership at 74 per cent.

The new norms, which envisage diversified shareholding in private sector banks by a single entity/corporate entity/group of related entities, are aimed at helping them meet the additional capital under the Basel-III regulations and to rationalise the ownership limits, the RBI said.

Bundling the ownership limits for all shareholders into two broad categories of natural persons (individuals) and legal persons (entities/institutions), the RBI has stipulated separate limits for non-financial and financial institutions, which have been divvied into diversified and non-diversified institutions.

Ownership limits for all shareholders in the long run are now stipulated under two broad categories:

(i) natural persons (individuals) and

(ii) legal persons (entities/institutions).

Further, separate limits are now stipulated for (i) non-financial and (ii) financial institutions; and among financial institutions, for diversified and non-diversified financial institutions.