PSU banks can alter authorised capital: FinMin

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SummaryThe government is hopeful that the Banking Laws (Amendment) Bill, 2011, which was enacted by Parliament in the just-concluded Winter Session, will help to further develop the country’s banking sector.

The government is hopeful that the Banking Laws (Amendment) Bill, 2011, which was enacted by Parliament in the just-concluded Winter Session, will help to further develop the country’s banking sector.

Apart from enhancing the regulatory powers of the RBI that would facilitate new bank licenses, the legislation will also enable nationalised banks to raise capital by issue of preference shares or rights issue or issue of bonus shares.

“It would also enable them to increase or decrease the authorised capital with approval from the Government and RBI without being limited by the ceiling of a maximum of Rs 3,000 crore,” a finance ministry release said.

Further, the amendments which have brought changes to the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980, will also pave the way for foreign banks to move to a wholly-owned subsidiary model in India.

At present, they operate through the branch model, but the legislation exempts conversion of branches of foreign banks to wholly-owned subsidiary entities of foreign banks and transfer of shareholding of banks to the holding company structure pursuant to guidelines of RBI from payment of stamp duty. The amendment was brought in after discussions with IBA, RBI and industry associations.

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