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Asia-PacificAugust 1 2004

Reserve Bank of India ruling dismays bankers and investors

A proposed policy on ownership rules for Indian private banks put out by the Indian central bank on July 2 has left bankers and investors dismayed. To ensure that ownership and control of private banks is as diverse as possible, the Reserve Bank of India, the central bank, proposes to limit ownership by a single investor or corporate group to 10% of the paid-up capital of the bank.
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The 10% cap extends to foreign investment by a single investor or group, either by way of foreign direct, private equity or portfolio investment.

The voting right of a single investor is already capped at 10%. The draft policy says core shareholders may own a higher stake in a new bank but must pare it down to 10% within three years.

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