Banking News

Green light must before stake buy in banks: RBI


TNN
Mumbai: The Reserve Bank of India (RBI) has come out with new regulations for acquisitions and holding a significant equity stake in a bank. The new norms prescribe getting ‘fit and proper’ clearance before buying a stake in a bank, and the rules for persons acting in concert have been tightened. There is also a minimum lock-in period for strategic shareholders and a time limit for buying shares after the RBI nod.
The new norms come ahead of the government’s proposed stake sale in IDBI Bank. Investors who have submitted their expressions of interest for the bank will need to get themselves certified as ‘fit and proper’ from the RBI before buying shares. Under the new norms, if the bank’s board feels that a shareholder is looking to get a strategic stake, the board has to inform the RBI even if the shareholding is less than 5%.
Where the shareholding is not compliant with RBI’s norms, banks must submit an action plan for diluting shares within six months. The RBI has placed the onus on the bank’s board to ensure that the bank establishes a continuous monitoring mechanism to ascertain that a major shareholder has obtained prior approval of the RBI for the shareholding/voting rights.
The guidelines require any person intending to be a major shareholder to make an application to assess their ‘fit and proper’ status. The RBI has said that the ‘fit and proper’ status can be conditional and valid, subject to the acquisition being completed in a specific time frame. The permission is also limited to one transaction and must be taken afresh for new purchases if the shareholding drops below 5%.
The guidelines also bar investors from countries not compliant with financial action task force (FATF) rules. Currently, 38 countries are compliant, while others are at various levels of non-compliance.“The banking companies (excluding payments banks) which are operational as on the date of issue of these directions and where the aggregate holding of a person is not in conformance with the guidelines shall within six months from the date of issue of these directions submit a shareholding dilution plan,” the RBI said.
Any bank shareholder permitted to hold over 10% but below 40% shares shall remain under lock-in for the first five years from the date of completion of the acquisition. In case any person is permitted to have a shareholding of 40% or more, only 40% of the shareholding shall remain under lock-in for the first five years from the date of completion of the acquisition. Also, the shares which are under lock-in cannot be encumbered.





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