RBI’s report on banking governance of bank boards, headed by ex-chairman of Axis Bank PJ Nayak, has highlighted the need for one-license regulatory regime for all broad-based banks, irrespective of their ownership pattern. This would also not preclude RBI from issuing niche licenses under other more narrowly defined, licensing regimes, if the country’s Apex Bank decides to do so. Notably, these recommendations were first suggested by the banking regulator in a discussion paper in 2013.
The panel’s report further highlighted that such a licensing regime would also involve uniform investment limits across investor categories, irrespective of ownership. However, it clarified that all the other investment limits recommended for private sector bank would be applicable to public sector banks, except for government’s own controlling stake.
The report added that this recommendation, if implemented would facilitate larger pools of capital for these banks, which in turn would help public sector bank market valuation. Further, the report also recommended induction of private equity through board representation as another option of financing for the government in case of distressed public sector banks, which would also help improve bank’s board governance.
