P J Nayak report calls for single bank licencing regime

May 13 2014, 22:18 IST
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SummaryThere is a need for bank licencing regime to move to a uniform mode for all broad-based banks, irrespective of their ownership.

There is a need for bank licencing regime to move to a uniform mode for all broad-based banks, irrespective of their ownership, an RBI panel report said today.

The report on banking governance of bank boards, headed by ex-chairman of Axis Bank P J Nayak, said the one-licence regulatory regime for banks with broad-ranging businesses would also not preclude RBI issuing niche licences under other more narrowly defined, licensing regimes, if it were to choose to do so.

"It would be desirable for the bank licensing regime to move to a uniform license across all broad-based banks, irrespective of ownership, subject to inter-jurisdictional reciprocity considerations in respect of foreign banks, and niche licenses for banks with more narrowly defined businesses," the report said.

It further said such a licensing regime would also involve uniform investment limits across investor categories, irrespective of ownership.

Apart from the government's own controlling stake, all other investment limits recommended for private sector banks should also thereby be applicable to public sector banks.

"This will facilitate larger pools of capital coming into these banks, and assist in improving public sector bank market valuations," the report added.

For distressed public sector banks, it provides the government with another financing option through the induction of private equity with board representation, a partnership which could also help improve board governance.

"Other than the government's own stake, which would be unconstrained, all other investment limits for different categories of investors in private sector banks should also be applicable to investors in public sector banks," the report added.

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