Decision may spark controversy given recent bank closures: Report

As per a report by Macquarie Research, the RBI just released an internal working group (IWG) report to review ownership guidelines and corporate structure for private sector banks.

“While the arguably bold recommendations suggest NBFCs as well as corporate houses could apply for a banking licence, we believe the possibility of them being granted is very remote,” the report said.

The timing of this report is quite surprising, coming amidst a spate of bank failures. “At a time when bank failures are increasing in India, the decision to distribute licences could be controversial, in our view. We expect RBI to exercise caution in this regard and hence some recommendations may not come to fruition”, the report added.

For example, the Nayak Committee in May 2014 suggested that a class of investors called Authorised Bank Investors (ABI) be allowed to hold a 20 per cent stake in private sector banks without any regulatory approval. The recommendations of that committee were never implemented.