INVESTORS NEED RBI NOD TO BUY 5% OR MORE IN BANKS

MUMBAI (TIP): The Reserve Bank on Thursday said its prior approval will be required for acquisition of shares or voting rights in a private bank for increasing the aggregate holding to 5% or more, as it put in place detailed take purchase norms in banks.

The RBI would undertake a due diligence on the applicant to assess his “fit and proper” status before according or denying permission or according permission for acquisition of a lower quantum than that has been applied for. The decision “shall be binding” on the applicant and the bank concerned.

The provisions will apply to the existing and proposed `major shareholders’ of the private sector banks and all private sector banks, including local area banks. However, where the acquisition results in the aggregate holding of the major shareholder of up to 10% of the shares or voting rights of the concerned bank, prior approval of the RBI is not necessary .

`Major shareholder’ means shareholder havinglikely to have an `aggregate holding’ to the extent of 5% or more of the paid-up share capital of the bank or 5% or more of the total voting rights.

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