The Hindu : RBI wants appropriate regulatory powers

Online edition of India's National Newspaper
Friday, Dec 12, 2003

Business

Business

RBI wants appropriate regulatory powers

By Our Special Correspondent

MUMBAI DEC. 11. The Reserve Bank of India (RBI) Governor, Y. V. Reddy, today said that the central bank `is not comfortable' with lack of clear statutory provisions regarding takeover of bank managements in terms of the legal framework.

In 1970, the RBI had issued directions to banks requiring them to seek the RBI's permission or acknowledgement before effecting any transfer of shares in favour of any person which would take the holding of shares to more than one per cent (subsequently raised to 5 per cent) of the total paid up capital of such banking company.

To plug the gap, a Bill has now been introduced in Parliament relating to banking regulations, Dr. Reddy said while inaugurating the Bank Economists' Conference-2003. "The RBI's proposals in this regard should reasonably take care of takeover of the management by one from another and the Reserve Bank of India will have appropriate regulatory powers to satisfy itself that persons proposing to acquire such shares are fit and proper persons".

"The RBI's proposals in this regard should reasonably take care of takeover of the management and RBI would have appropriate regulatory powers to satisfy itself that persons proposing to acquire such shares are fit and proper persons," he added. He said the experience of the RBI had been by and large satisfactory in approving several schemes of amalgamation in the recent past.

However, Mr. Reddy said one area of concern to RBI was merger of non-banking companies with banks as the law does not impose any obligation on the part of the latter to seek RBI's approval before filing the scheme in high courts, he said. To take care of these regulatory gaps, he said, the RBI had proposed some amendments to the legislation of Banking Regulations Act that merger of a non-banking company with a bank would be made by following a similar procedure now applicable for merger of two banking entities.

Dr. Reddy further stated that a draft `Payment and Settlement Systems' Bill was prepared by the RBI and forwarded to the Union Government. In anticipation of the statutory changes, certain preliminary steps are proposed to be taken by the RBI to build the requisite infrastructure for having effective supervision over payment and settlement systems. A Board for Payment and Settlement Systems (BPSS) is proposed to be constituted soon, he added.

Printer friendly page
Send this article to Friends by E-Mail

Business