RBI Bank Licensing and Ownership Norms Review: Malhotra’s Signals
Why in the news
RBI plans to revisit how banks are licensed and owned so the rules suit a bigger economy, prompted by demand for financial intermediation and foreign investor interest.
| Ownership norm now in force | Limit |
|---|---|
| Foreign ownership incl. portfolio investors | Up to 74% |
| Strategic foreign investor | 15% cap |
| Stake needing prior RBI approval | 5% or more |
| Voting rights of large shareholders | 26% cap |
Key facts
- Malhotra said the 15% non-resident limit can be exceeded case by case; Fairfax got 51% of Catholic Syrian Bank.
- Emirates NBD won approval for a wholly owned subsidiary in India.
- IDBI Bank sale: Government 30.48%, LIC 30.24%.
- Investors face a fit and proper check.
- Type I NBFCs (non-deposit-taking, no public interface) may get tailored rules.
Significance
- Modern licensing, flexible foreign capital with oversight, possible bigger roles for good small finance banks, lower NBFC compliance burden.
Exam angle
- Caps: 74% foreign, 15% strategic, 26% voting; Governor: Sanjay Malhotra.