Shareholding in Banking Companies

Here are the notes on shareholding in banking companies, along with some multiple choice questions (MCQs) and answers:

Notes

• The Reserve Bank of India (RBI) regulates the shareholding in banking companies in India.
• The RBI has set limits on the maximum shareholding that any individual or entity can have in a banking company.
• The limits are as follows:
  • Promoters: 26% (in the long run, i.e. after the completion of 15 years from commencement of business of the banking company)
  • Non-promoters: 10%
  • Public: 64%
• The RBI also has rules on the lock-in period for shareholding in banking companies.
• The lock-in period is the period during which the shares cannot be sold or transferred.
• The lock-in period for different types of shareholders is as follows:
  • Promoters: 5 years
  • Non-promoters: Nil
  • Public: Nil

MCQs

1. What is the maximum shareholding that a promoter can have in a banking company in the long run?
   • 10%
   • 20%
   • 26%
   • 30%
   • The answer is 26%.
2. What is the lock-in period for shares held by promoters in a banking company?
   • 3 years
   • 5 years
   • 7 years
   • 10 years
   • The answer is 5 years.
3. Which of the following entities is not allowed to have a shareholding of more than 10% in a banking company?
   • An individual
   • A trust
   • A company
   • A foreign bank
   • The answer is a foreign bank.
4. The RBI can relax the shareholding limits in banking companies in certain cases. Which of the following is NOT a case where the RBI can relax the shareholding limits?
   • When the banking company is facing financial difficulties
   • When the banking company is merging with or acquiring another banking company
   • When the banking company is expanding into new areas of business
   • When the banking company is raising capital from the public
   • The answer is when the banking company is raising capital from the public.

Answers

1. (c)
2. (b)
3. (d)
4. (e)