India’s central bank suggests major overhaul of banking sector norms

Photo: Reuters

An Indian central bank working group 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 also suggested adjusting the size of the stakes major shareholders can hold in a lender.

For non-promoter shareholdings a uniform cap of 15% instead of a current tiered structure has been 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.

In 2018, billionaire banker Uday Kotak, managing director of Kotak Mahindra Bank, took the central bank to the court over an order from the regulator to reduce his stake in the lender to 15%.

The panel’s recommendations may also pave the way for shadow banks to convert into lenders. A Non Banking Financial Company (NBFC) or shadow bank with assets of 500 billion rupees ($6.75 billion) and above may be considered for conversion into a bank after 10 years of operations, the report said.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.