On January 16, 2023, the Reserve Bank of India (RBI) issued ‘Acquisition and Holding of Shares or Voting Rights in Banking Companies Directions, 2023’ which allowed promoters to hold 26% from the current 15% of the paid-up share capital or voting rights of a bank after the completion of 15 years from commencement of its business.
- This increase in the cap on promoters’ stake is based upon the Internal Working Group (IWG) recommendations in 2021.
Key Points:
i.If the shareholder intends to get a strategic stake, the board has to inform the RBI even if the shareholding is less than 5%.
- In case, the shareholding is not compliant with RBI’s norms, banks must submit an action plan for diluting shares within 6 months.
ii.A ‘fit and proper’ clearance is required through continuous monitoring before buying a stake in a bank.
iii.During the period prior to the completion of the 15 years, the promoters of banking companies are allowed to hold a higher percentage of shareholding as part of the licensing conditions or as part of the shareholding dilution plan submitted by the banking company and approved by the RBI.
iv.RBI also permits higher shareholding on a case-to-case basis under circumstances such as relinquishment by existing promoters, supervisory intervention including under Prompt Corrective Action (PCA), reconstruction/restructuring of banks, entrenchment of existing promoters etc., as per the guidelines issued.
v.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.
vi.Any bank shareholder permitted to hold over 10% but below 40% shares will remain under lock-in for the first 5 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 will remain under lock-in for the first five years from the date of completion of the acquisition.
- The shares which are under lock-in cannot be encumbered.
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Protean’s arm gets RBI nod for AA Licence
Protean eGov Technologies Limited (formerly NSDL e-Governance Infrastructure Limited), has received approval from the RBI for its wholly owned subsidiary to operate as an Account Aggregator (AA) with an NBFC (Non-Banking Financial Company)-AA certificate.
- AA is a type of RBI regulated entity (that helps an individual to securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution. Data cannot be shared without the consent of the individual.
About Protean:
It has collaborated with the government over the last 25 years to create digital public infrastructure and develop innovative citizen centric e-governance solutions, including modernizing the direct tax infrastructure, providing a tax identity to citizens and corporates through issuance of PAN cards, strengthening the old-age social security infrastructure through the National Pension System (NPS) and Atal Pension Yojna, and enabling Aadhaar-based identity authentication and e-Sign services.
About Protean eGov Technologies Limited:
MD & CEO– Suresh Sethi
Headquarters– Mumbai, Maharashtra
