Page 10 - DMGT303_BANKING_AND_INSURANCE

Unit 1: Indian Banking System

The Reserve Bank would permit a higher level of shareholding on a case by case basis for Notes
restructuring of problem/weak banks or in the interest of consolidation in the banking
sector; and
If the shareholding exceeds the prescribed limit of the net worth is below Rs.300 crore in
any bank, a time bound programme to reduce the stake or to augment the capital should
be submitted to the Reserve Bank.
On the issue of aggregate foreign investment in private banks from all sources (FDI, FII, NRI),
the guidelines stipulate that it cannot exceed 74% of the paid up capital of a bank. If FDI (other
than by foreign banks or foreign bank groups) in private banks exceeds 5%, the entity acquiring
such stake would have to meet the “fit and proper” criteria indicated in the share transfer
guidelines and get the Reserve Bank’s acknowledgement for transfer of the shares. The aggregate
limit for all FII investments is restricted to 24% which can be raised to 49% with the approval of
the board/shareholders. The current aggregate limit for all NRI investments is 24%, with the
individual NRI limit being five percent, subject to the approval of the board/shareholders.
The following are the list of Private Sector Banks in India:
Axis Bank

HDFC Bank
ICICI Bank
IndusInd Bank
ING Vysya Bank

Kotak Mahindra Bank
Yes Bank
Buldana Urban Co-op Society.

1.4 Pre-Reforms Development

1.4.1 Lead Bank Scheme

On the recommendations of FKF Nariman Committee, the Lead Bank Scheme was introduced in
December 1969. Under the Scheme, the country was divided into 338 districts and they were
distributed among major scheduled banks, mostly in the public sector, to play the ‘Lead’ role in
coordinating the efforts of all credit institutions in the district for planned growth in branch
network and credit deployment in the district.
Lead Bank prepares a District Credit Plan (DCP) and subsequently “Annual Action Plan” which
stipulates targets to provide credit to priority sectors, weaker sections etc. The performance of
the branches within the lead area are monitored by Block Level Bankers Committee at the block
level, District Consultative Committee at the district level and State Level Bankers Committee
at the state level.

The progress of the branches in the lead area are monitored by well laid down management
information and reporting systems. The returns to be submitted by the branches to the lead
bank are:
1. Lead Bank Return - 1 (service area credit plan): It is an annual return submitted by the
branch to the BLBC before 26th February every year, giving details of annual credit plan
of the branch.

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