(Video) Rajya Sabha TV (RSTV) The Big Picture: Banking Sector Overhaul

Topic: Banking Sector Overhaul

Guest:

Sidhartha, (National Economic Editor, TOI)
Ajay Shankar, (Former Secretary, DIPP, Ministry of Commerce & Industry, GOI)
Dr. P. Pullarao, (Economist)

Topic Description:

A working group at the RBI has recommended a series of changes that could transform the country’s banking landscape by paving the way for large industrial conglomerates to set up banks. The proposals could also allow large non-banking finance companies and niche payment banks to convert into lenders. In a report made public on Friday, the committee recommended that banking regulations be amended to allow large industrial houses to act as so-called bank promoters, meaning they could take a significant stake in a lender, something the central bank has strongly resisted in the past. As well as opening up the banking sector, the committee suggested adjusting the size of the stakes major shareholders can hold in a lender. For investors not involved with the bank at the outset, or non-promoter shareholders, a uniform cap of 15% instead of a current tiered structure was suggested by the committee, which was formed in June to review ownership guidelines and the corporate structure of Indian private sector banks. It recommended increasing the size of the stake that promoters in private banks can hold to 26% from the current 15% over a 15-year time frame.