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New Delhi, May 5: Having got the Cabinet nod for allowing foreign partners in Indian private banks voting rights commensurate with their shareholding, the finance ministry is now preparing the ground to push amendments to the Bank Nationalisation Act to facilitate mergers and consolidation in the sector.
Though the ministry would not initiate any mergers, it is in favour of banks in merged entity retain their individual identities.
However, the ministry is proposing to accommodate four permanent directors in a public sector bank in place of two. At present, there can be one CMD and one executive director on the bank board.
The finance ministry intends to get Cabinet approval for the amendment shortly.
“This amendment would encourage banks to go in for consolidation. The amendment would also help in the management of the bank. It is too unwieldy for just two directors to manage big banks,” a senior government official said.
Meanwhile, with the amendment of the Banking Regulation Act, now voting rights of the foreign partners would be in line with their shareholding pattern. However, to increase FDI limit, the private sector banks will have to seek prior approval of the Reserve Bank of India. As per the recent RBI guideline, FDI limit can be increased by 5% every year to a maximum of 74%. “As and when the foreign partners increase their share by 5% annually, depending on the RBI approval, their voting rights would go up correspondinly,” the official said.
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