RBI working group on bank ownership puts greater onus on promoters, says Hinduja Group

MUMBAI: IndusInd Bank promoters the Hinduja Group which was seeking to increase shareholding in the lender has welcomed the Reserve Bank of India Internal Working Group’s report set up to review ownership in private banks.

The committee has recommended allowing bank promoters to hold 26% over a period of 15 years from the current 15%. It has also spoken in favour of allowing industrial houses as bank promoters with legislative changes to the banking regulation act.

“The Working Group has taken a timely and bold stand by proposing a uniform regulatory framework for the entire banking system, dispensing with the regulatory arbitrage available between banks, NBFCs, small finance banks and payment banks,” said Ashok Hinduja, chairman,

Hinduja Group of Companies (India).

Hinduja also said that the shareholder equity has to be the first line of defense in a robust banking system.

“The report rightfully puts a greater onus on the promoter-shareholders to exercise oversight through a higher shareholding limit of 26%, with commensurate voting rights,” he said. “It helps strengthen the institutional framework by ensuring the promoter responsibility with more skin in the game, Supervisory stance for large conglomerates, including consolidated supervision will ensure the necessary check and balance in the system.”

The promoters of IndusInd Bank, IndusInd International Holdings held largely by the four Hinduja brothers had requested the RBI in March this year to allow them to hike promoter stake in the bank. This was after the regulator had allowed Kotak Mahindra Bank promoter Uday Kotak to hold 26% in the bank. The RBI had not favourably responded to Hinduja’s request.

Hinduja also said that he was hopeful that the regulator would implement these recommendations in a timely fashion.

“We hope the RBI will be able to implement these guidelines within a specified time frame,” Hinduja said. “Ring fencing the banking sector from a myriad of emerging risks has to be a constant endeavour, and I am certain the Reserve Bank of India will exercise a continuous vigil as it has done in the past.”