RBI issues guidelines on acquisition on banks

The Reserve Bank of India on Monday issued Directions on “Acquisition and Holding of Shares or Voting Rights in Banking Companies”, allowing promoters to hold 26 per cent of the paid-up share capital or voting rights of a bank after the completion of 15 years from commencement of its business even as any person intending to make an acquisition which is likely to result in major shareholding in a bank has to seek its prior approval for acquisition.

Further, the central bank wants continuous monitoring of such shareholders for ‘fit and proper ’criteria.

During the period prior to the completion of the 15 years, the promoters of banking companies may be allowed to hold a higher percentage of shareholding as part of the licensing conditions or as part of the shareholding dilution plan submitted by the banking company and approved by the Reserve Bank with such conditions as deemed fit.

Reserve Bank may also permit higher shareholding on a case-to-case basis under circumstances such as relinquishment by existing promoters, supervisory intervention including under Prompt Corrective Action, reconstruction/restructuring of banks, entrenchment of existing promoters or any other action in the interest of the banking company and its depositors or in the interest of consolidation in the banking sector, etc., per the guidelines issued along with the Directions.