No move to hike foreign ownership limits in banks now: RBI Governor Sanjay Malhotra

The RBI allows a single foreign institution to hold 15 per cent in a lender and has made some exceptions like that of CSB Bank, and, recently, Japan’s SMBC

Mumbai: Reserve Bank Governor Sanjay Malhotra on Friday said there is no move to increase foreign ownership limits beyond 15 per cent in a single institution at present.

Speaking to reporters at the central bank headquarters here, Malhotra said the RBI will be undertaking an exercise to re-look at the ownership structure in banks and various issues like ownership structures and eligibility criteria.

---

Malhotra, however, said that a growing economy like India needs more banks, but was quick to add that we need owners and managers, who are trustworthy.

“We allow 15 per cent for non-residents, and it can go up above 15 per cent on a case-to-case basis. There is no change in this anytime soon or immediately,” Malhotra said.

It can be noted that usually, the RBI allows a single foreign institution to hold 15 per cent in a lender and has made some exceptions like that of CSB Bank, where Canada-based investor Fairfax has been allowed to own 51 per cent and recently, it allowed Japan’s SMBC to own 20 per cent of Yes Bank.

Terming it a “deeper question” which will take time to reach a conclusion, Malhotra hinted that the RBI may look at allowing higher foreign ownership of banks in the future.

“We have also said that we want to re-look at ownership structure and eligibility conditions under which non-residents, who are at 15 per cent, we are examining at present. It will not happen immediately, it will take time,” he said, stressing that whatever is best for the economy will be taken on board.

“Certainly, our economy is growing, we require more banks. Keeping that in mind, if there is a need for change in the ownership criteria, we will do it,” he added.

Meanwhile, when asked if the RBI will go back on its November 2023 regulation on increasing the risk weights in unsecured lending because of the comfort on asset quality from credit cards and personal portfolios, Malhotra replied in the negative, saying there are no such plans.