The Reserve Bank of India, on Friday, released the much-awaited modified rules for ownership and corporate structure of private banks in India. 21 recommendations out of the 33 made by the internal working group have been accepted. The most controversial of the lot, relating to corporate ownership of banks has not been accepted by RBI just yet.

The key change is that the cap on promoters' stake will be raised to 26 percent from the current 15 percent. In an interview with CNBC-TV18, Krishnan ASV, Lead Analyst, BFSI at HDFC Securities, shed light on the new rules.

Read Here: RBI announces new norms for private banks; corporate ownership not allowed just yet

He said, “So, three broad things- one around the promoter ownership, which probably impacts IndusInd Bank and Kotak Mahindra Bank. Now that the promoters can stay at 26 percent, that means there is no dilution risk in Kotak for sure. At IndusInd, the Hindujas could always look at how to raise the stake further.”

He further mentioned, “Number two is in terms of not allowing corporates yet or at least that’s what it seems like as RBI seems to remain silent on that. I was expecting some moves there because if you want to privatise some of these PSU banks, you want to create a seller's market rather than a buyers’ market. But by restricting the field, unfortunately, you may have a buyers’ market.”

On IndusInd Bank, Krishnan said, “We have reduced stake here. We think there are issues beyond just ownership. Of course, ownership was an overhang as well. The warrant conversion during the last cycle itself took its own sweet time. They needed some RBI forbearance there. But having said that, I don't think ownership necessarily takes away all the risk from IndusInd Bank from an operational perspective right now. I think there are other issues that they need to fix and we remain quite cautious on the name.”

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(Edited by : Dipikka Ghosh)

First Published:Nov 29, 2021 11:03 AM IST