private banks will be acquired by foreign banks' subsidiaries
The Reserve Bank today permitted
wholly-owned subsidiary (WOS) of foreign banks to acquire domestic
private sector banks as well as set up branches anywhere in the
country.
It also allowed foreign bank subsidiary to list on
local stock exchanges.
However, foreign bank subsidiary will
not be allowed to hold more than 74 per cent, the sectoral cap for
overall foreign investment, in the private banks they may acquire.
"As a locally incorporated bank, the WOSs will be given
near national treatment which will enable them to open branches
anywhere in the country at par with Indian banks (except in certain
sensitive areas where the Reserve Bank's prior approval would be
required)," the RBI guidelines said.
Such conversion is
also desirable from the financial stability perspective, the
framework for setting up of WOS by foreign banks in India said.
"The issue of permitting WOS to enter into merger and
acquisition transactions with any private sector bank in India
subject to the overall investment limit of 74 per cent would be
considered after a review is made with regard to the extent of
penetration of foreign investment in Indian banks and functioning of
foreign banks (branch mode and WOS)," it said.
To
provide safeguards against the possibility of the Indian banking
system being dominated by foreign banks, it said, the framework has
certain measures to contain their expansion if the share of foreign
banks exceeds a critical size.
RBI will put a stop on further
entry of new WOSs of foreign banks or capital infusion, when the
capital and reserves of all foreign banks in India exceed 20 per cent
of the capital and reserves of the entire banking system.
As
per the guidelines, the initial minimum paid-up voting equity capital
or net worth for a WOS would be Rs 500 crore.
No comments:
Post a Comment