Mumbai: The Union Cabinet's approval of the Banking Laws (Amendment) Bill, which will raise the cap on voting rights for shareholders to 26 percent in private banks, is likely to encourage private investment in this space, according to experts.
"Increasing the cap on voting rights to 26 percent is definitely a welcome development in the banking space. It should increase the appetite of private investment in the near future," PWC Associate Director Robin Roy told here.
He, however, said issues relating to branch licencing and priority sector lending should also be sorted out to improve investor interest in the banking sector.
On Wednesday, the Union Cabinet approved a proposal to cap shareholders' voting rights in private banks at 26 percent, irrespective of their total holding, from the existing 10 percent. The amendment, now awaiting Parliament nod, is a key development before rolling out of new banking licenses by RBI.
"We welcome the Cabinet’s decision to clear the Banking Regulation (Amendment) Bill as a key step towards the issue of new banking licenses," Religare Enterprises Group Chief Executive Officer Shachindra Nath said.
He said if passed, this would eventually increase higher credit flow to Tier-II and Tier-III cities.
According to data, private lenders like Development Credit Bank, IndusInd Bank, Yes Bank, Kotak Mahindra Bank and ING Vysya Bank have a promoters' stake exceeding 10 percent by the end of March, 2012.
Talking about the developments, an official from a private bank said, "If the Bill is approved by Parliament, things will not be changed operationally in those banks with higher promoters' stake. However, this will definitely encourage more private players to enter into the banking industry."