Govt to form panel to review 26 pc voting cap for private investors in banks: Report

New Delhi, April 22
A high‑level government committee on banking for the Viksit Bharat initiative is likely to review the 26 per cent cap on voting rights for private shareholders in Indian banks under the Banking Regulation Act, 1949, a report said on Wednesday.

The panel, which has yet to be formally constituted, is expected to review the rule, as the voting restriction has been cited as a hurdle in the privatisation of IDBI Bank, after prospective investors sought greater control aligned with their equity stakes, the report from NDTV Profit said.

The panel is likely to include officials from the Reserve Bank of India and senior executives from large public sector banks and its terms of reference are expected to be finalised over the next three months, the report said.

Any change to raise the voting rights ceiling above 26 per cent would require a legislative amendment, with changes to the Banking Regulation Act and could be considered in the next session of Parliament, it added.

Currently, as per rules, a promoter may legally hold over 26 per cent of the shares in a private bank, but when it comes to voting at shareholder meetings, their voting rights are capped at 26 per cent worth of shares.

The foreign investors can currently hold up to 74 per cent of a private bank’s equity, including 49 per cent via the automatic route and the remainder with government approval. However, their voting rights remain capped at 26 per cent regardless of shareholding.

"The panel is expected to examine ways to make India's banking sector more globally competitive, with a broader goal of enabling at least two Indian banks to break into the world's top 20 by size," the report noted.

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