New Banks in the private sector have something to smile about. The RBI on Monday released the draft norms for licensing to these banks with the minimum requirement for capital, 500 crore. They have termed some key features of the draft guidelines:
The criteria for eligibility are that, the promoters in the private sector must own the properties and must be the residents. They must have diversified ownership, sound credentials and must have a good track record in the last 10 years.
The corporate structure of these banks will be through a completely owned Non Operative Holding Company, which needs to be registered with the RBI as a Non Banking Finance Company.
The minimum capital requirement will be 500 crore with the NOHC will hold atleast 40% of paid capital for a period of 5 years.
Share holding above 40% will be reduced to 20% within 10 years and 15% within 12 years after the date of licensing. In the case of foreign share holding, the share holding will not exceed 49% till 5 years and after that it will depend upon the policy. 50% of directors of NOHC should be independent directors.
The business model should be realistic and should be able to show how it will achieve financial inclusion. The bank’s exposure would not exceed 10% for promoter group and will not exceed 20% for all the entities in the group. The shares of the bank will be listed on the stock exchanges in 2 years span after licensing.
The bank should open up to 25% of its branches in unbanked rural centres and the existing NBFC’s will be eligible or else they can convert themselves into banks.
It may be recalled that pursuant to the announcement made by Union Finance Minister Pranab Mukherjee in his budget speech and the Reserve Bank's Annual Policy Statement for the year 2010-11, a discussion paper on 'Entry of new banks in the private sector' was placed on RBI website on August 11, 2010.
The discussion paper marshalled international practices, Indian experience as well as the extant ownership and governance (O&G) guidelines.
The Reserve Bank had sought views/comments from banks, non-banking financial institutions, industrial houses, other institutions and the public at large. Discussions were also held with major stakeholders to seek their comments and suggestions on the issues raised in the paper.
The gist of comments on various issues received through email and letters and discussions was placed on Reserve Bank's website on December 23, 2010.
The draft guidelines have been prepared based on the responses received, extensive internal discussions and consultation with the Government of India.
The final guidelines will be issued and the process of inviting applications for setting up of new banks in the private sector will be initiated thereafter.
After receiving feedback, comments and suggestions on the draft guidelines, and after certain vital amendments to Banking Regulation Act, 1949 are in place.
The Reserve Bank has sought views/comments on the draft guidelines from banks, non-banking financial institutions, industrial houses, other institutions and the public at large.
Source: http://www.rediff.com/business/slide-show
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