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The Finance Minister has tabled legislation in Parliament to amend the Banking Regulation Act.
Objective of the Amendment Bill
The Banking Laws (Amendment) Bill, 2011, seeks to amend banking acts to make the Reserve
Bank of India’s (RBI) regulatory powers more effective and increase the access of nationalised
banks to the capital market to raise capital required for expansion of banking business and to
make certain of other consequential amendments in certain other enactments.
Key proposals of the Amendment Bill
Provide nationalised banks the right to issue two additional instruments (“bonus shares” and
“rights issue”) to access the capital market to raise required capital for expansion of banking
business
Raise the ceiling on voting rights of shareholders of nationalised banks from 1% to 10%
Remove the existing restriction on voting rights limited to 10% of the total voting rights of all
shareholders of the banking company
Enable banking companies to issue preference shares, subject to RBI’s regulatory guidelines
Make provisions to ensure that control of banking companies is in the hands of fit and proper
persons; it should be mandatory for the persons who propose to acquire 5% or more of the
share capital of a banking company to obtain prior approval from RBI
Confer power on RBI to impose such conditions as it deems necessary while granting such
approval for acquisition of 5% or more share capital of a banking company (including
specifying acquisition of a minimum percentage of shares in a banking company) if
considered necessary
Insert a new section in the Banking Regulation Act so as to exempt mergers of the banking
companies from the applicability of the provisions of Competition Act 2002. The Bill states that
this will allow RBI to approve mergers of the banking companies in public or depositors'
interest, interest of the banking system in India and to secure the proper management of the
bank in a timely manner without waiting for approval from the Competition Commission of
India
Note, at this stage, this is an amendment Bill which is presented to Parliament for its approval. In
our view, the proposed amendments will likely not have any immediate impact but are structurally
positive over the long term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Event
The Finance Minister has tabled legislation in Parliament to amend the Banking Regulation Act.
Objective of the Amendment Bill
The Banking Laws (Amendment) Bill, 2011, seeks to amend banking acts to make the Reserve
Bank of India’s (RBI) regulatory powers more effective and increase the access of nationalised
banks to the capital market to raise capital required for expansion of banking business and to
make certain of other consequential amendments in certain other enactments.
Key proposals of the Amendment Bill
Provide nationalised banks the right to issue two additional instruments (“bonus shares” and
“rights issue”) to access the capital market to raise required capital for expansion of banking
business
Raise the ceiling on voting rights of shareholders of nationalised banks from 1% to 10%
Remove the existing restriction on voting rights limited to 10% of the total voting rights of all
shareholders of the banking company
Enable banking companies to issue preference shares, subject to RBI’s regulatory guidelines
Make provisions to ensure that control of banking companies is in the hands of fit and proper
persons; it should be mandatory for the persons who propose to acquire 5% or more of the
share capital of a banking company to obtain prior approval from RBI
Confer power on RBI to impose such conditions as it deems necessary while granting such
approval for acquisition of 5% or more share capital of a banking company (including
specifying acquisition of a minimum percentage of shares in a banking company) if
considered necessary
Insert a new section in the Banking Regulation Act so as to exempt mergers of the banking
companies from the applicability of the provisions of Competition Act 2002. The Bill states that
this will allow RBI to approve mergers of the banking companies in public or depositors'
interest, interest of the banking system in India and to secure the proper management of the
bank in a timely manner without waiting for approval from the Competition Commission of
India
Note, at this stage, this is an amendment Bill which is presented to Parliament for its approval. In
our view, the proposed amendments will likely not have any immediate impact but are structurally
positive over the long term.
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