The Reserve Bank of India (RBI) mandated in its “Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023” published on January 16, 2023, anyone who intends to make an acquisition that is likely to result in a major shareholding in a banking company should first obtain the RBI’s prior approval by submitting an application.
- “Major shareholding” refers to a person’s “aggregate holding” of 5% or more of the paid-up share capital or voting rights in a banking company.
Significance
i.The purpose of these guidelines is to maintain “fit and proper” status among the major shareholders of banking companies and to ensure that the ultimate ownership and control of banking companies are well diversified.
ii.These directions are issued in accordance with the powers granted by Sections 12, 12B, and 35A of the Banking Regulation Act, 1949.
- These directions may be read along with the “Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies” issued by the RBI.
iii.These directions will take effect on the date of issue i.e., January 16, 2023.
Key Points:
i.The decision of the RBI to permit, deny, or permit a lower number of shares will be binding on the applicant and the bank when the entity intending to acquire a stake in banks has completed its due diligence.
ii.If a person’s shareholding falls below 5% after an acquisition, the person must seek fresh approval from the RBI if the person intends to increase the aggregate holding to 5% or more.
- A reference must be made to the RBI by the banking company along with a copy of the board resolution and all necessary documents, even if the acquisition/aggregate holding is less than 5% of the paid-up share capital or voting rights of the banking company.
iii.Banks whose aggregate shareholding of entities does not meet the guidelines will be required to comply within 6 months.
iv.The RBI will specify a differentiated shareholding dilution plan for Private Banks where the state or union government owns a stake.
v.Any person from the Financial Action Task Force (FATF) non-compliant jurisdiction will be restricted from acquiring a major shareholding in a bank.
- However, the existing major shareholders from such FATF-non-compliant jurisdictions will be permitted to keep investing as long as no additional acquisitions are made without the RBI’s prior approval.
Paytm Payments Bank gets final RBI nod to operate as Bharat Bill Payment Operating UnitÂ
The RBI has granted final approval to Paytm Payments Bank Ltd (PPBL) for it to operate as a Bharat Bill Payment Operating Unit (BBPOU) under the Payment and Settlement Systems Act, 2007.
- As a BBPOU, PPBL has the ultimate power to manage bill payment and aggregation business as an entity under the Bharat Bill Payment System (BBPS).
- BBPS is owned by the National Payments Corporation of India (NPCI).
Key Points:
i.A BBPOU is permitted to provide bill payment services under BBPS for services like electricity, phone, DTH (Direct to Home), water, insurance, gas, loan repayments, FASTag recharge, education fees, credit card bills, and municipal taxes.
- PPBL has been carrying out this activity until now with RBI’s in principle approval.
ii.All agent institutions onboard will be displayed by PPBL on its website in accordance with directions from the RBI.
Recent Related News:
Recently, the RBI has approved the appointment of Surinder Chawla as the new Chief Executive Officer (CEO) of Paytm Payments Bank Limited (PPBL). The appointment has been approved by the RBI for a period of 3 years.
About Paytm Payments Bank Ltd (PPBL):
Chairman- Vijay Shekhar Sharma
Headquarters- Noida, Uttar Pradesh
Establishment- 2017
