Private sector banks reforms:

Question 1

Context

Answer 1

Reserve Bank of India (RBI) had constituted an Internal Working Group (IWG) to review the extant ownership guidelines and corporate structure for private sector banks in India.

Question 2

headed by

Answer 2

Prasanna Kumar Mohanty

Question 3

terms of reference

Answer 3

• Review eligibility criteria to apply for banking license
• preferred corporate structure for banks
• Review of norms for long-term shareholding in banks

Question 4

Recommendations

Answer 4

• Raise the cap on promoters’ stake in private sector banks to 26% in the long run (15 years)
• Large corporate or industrial houses should be allowed as promoters of banks only after ammendements to 1949 act
• Improve the supervisory mechanism for large conglomerates
• well-run non-banking financial companies (NBFCs) may be considered for conversion into banks subject to certain conditions.
• For Payments Banks intending to convert to a Small Finance Bank (SFB), their track record of three years should be considered sufficient.
• minimum initial capital requirement for licensing new banks be enhanced from ₹500 crore to ₹1,000 crore for universal banks, and be raised to ₹300 crore from ₹200 crore for SFBs