Five years after New Delhi scrapped Jammu and Kashmir’s special status under Article 370 of the Indian Constitution, the Reserve Bank of India has recommended changes that might radically change the ownership of the erstwhile state’s premier financial institution – the Jammu and Kashmir Bank Limited.
The bank has a unique status in the country’s banking sector. For one, the major shareholder of the bank was the government of the erstwhile Jammu and Kashmir state – and, currently, the Union territory governments of Jammu and Kashmir and Ladakh. Second, while in other banks, the voting rights of shareholders are capped at 10%, no matter the size of their stake, the Jammu and Kashmir Bank Limited is exempt from that ceiling.
In a communication dated December 6, 2023, the RBI has urged the Union government to withdraw this exemption. Scroll has seen a copy of this letter.
The Reserve Bank of India has also recommended reducing the Jammu and Kashmir and Ladakh governments’ shareholding in the bank to below the regulatory threshold of 26%. As of March 2024, the governments of Union territories of Jammu and Kashmir and Ladakh hold a majority stake of 59.4% in the bank.
A 65-year-old exemption
The Banking Regulation Act, 1949, restricts shareholders in a banking company from exercising voting rights in excess of 10% of the total voting rights of all the shareholders of the company.
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