IndusInd Bank promoter Hinduja Group may raise stake in bank to 26% after RBI’s latest change in private bank norms

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IndusInd Bank promoter Hinduja Group may raise stake in bank to 26% after RBI’s latest change in private bank norms
BCCL
  • RBI has accepted 21 out of the 33 recommendations submitted by a central bank working group on ownership and corporate structure for private sector banks.
  • Among other recommendations, the cap on promoters holding in the long run of 15 years to be raised to 26% from 15%.
  • Small finance banks to now list within eight years of commencement of operations.
IndusInd Bank may benefit from the RBI’s latest change in ownership norms as promoter Hinduja Group might finally be able to raise its shareholding in the bank.

This comes after the Reserve Bank of India (RBI) brought new guidelines on the ownership and corporate structure norms for private sector banks. The central bank has accepted 21 out of the 33 recommendations submitted by a central bank working group.

Among other changes, it has raised the cap on promoters’ stake from current 15% to 26% of the paid-up voting equity share capital of the bank.

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“The move will definitely allow promoters to raise stake in the bank to 26% from 15% at present, which is a positive. The only question is will they really increase stake, because the stock has corrected too much in the last few years and I am not very sure about Hinduja’s financial status right now,” said Nitin Aggarwal, research analyst at Motilal Oswal.

IndusInd Bank promoter Hinduja Group may raise stake in bank to 26% after RBI’s latest change in private bank norms

Further, the RBI may introduce a reporting mechanism for pledging of shares by promoters of private sector banks.

Adding to it, RBI may create a monitoring mechanism to ensure that control of promoting entity/major shareholder of the bank does not fall in the hands of persons who are not found to be fit and proper.
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Here are some important changes accepted by RBI from recommendations made by internal working group:
Changes in ownership and corporate structure for Indian private sector banks
Cap on promoter holding increased to 26% from current 15%
Non-promoter shareholding will be capped at 10%
Natural persons and non-financial institutions/entities shareholding capped at 15%
Small finance banks to now list within eight years of commencement of operations
Universal banks will list within six years of operations
RBI to introduce a reporting mechanism for pledging of shares by promoters of private sector banks
Net worth required to set up a new universal bank increased to ₹1000 crore from present ₹500 crore
Net worth required to set up a new small finance bank increased to ₹300 crore from present ₹200 crore

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