RBI finalising licence norms for new banks: FinMin

The Reserve Bank of India (RBI) on Friday issued the final guidelines for issuing new bank licences which now clears the path for corporate houses to make a foray into banking sector.

Contrary to industry perception, the RBI guidelines did not exclude companies from any specific industry from applying for a new bank licence.  In contrast, the draft norms issued in 2011 had excluded companies in the property and brokerage segment from applying for new bank licence.  

Interested firms can apply for new bank licences to the RBI till July 1, 2013.

Further, RBI said that the new bank should open at least 25 per cent of its branches in unbanked rural centres (population upto 9,999 as per the latest census).  Enunciating the key features of the guidelines, RBI said entities or groups in the private sector, entities in public sector and Non-Banking Financial Companies (NBFCs) are eligible to set up a bank through a wholly-owned Non-Operative Financial Holding Company (NOFHC).

The entities should have a past record of sound credentials, integrity and financially sound with a successful track record of 10 years. For this purpose, the banking regulator may seek feedback from other regulators, and enforcement and investigative agencies.

The NOFHC should be wholly owned by the Promoter or Promoter Group while it should hold the bank as well as all the other financial services entities of the group. On corporate governance, the RBI said at least 50 per cent of the directors of the NOFHC should be independent directors but its corporate structure should not impede effective supervision of the bank and the NOFHC on a consolidated basis by the RBI.

The initial minimum paid-up voting equity capital for a bank should be Rs 500 crore. The RBI statement also that the NOFHC shall initially hold a minimum of 40 per cent of the paid-up voting equity capital of the bank, which should be locked- in for a period of five years and then it should be brought down to 15 per cent within 12 years. On foreign shareholding, the RBI statement said that the aggregate non-resident shareholding in the new bank should not exceed 49 per cent for the first 5 years after which it will be as per the extant policy.

On exposure norms, RBI made it clear that the NOFHC and the bank should not have any exposure to the Promoter Group and the bank should not invest in equity or debt capital instruments of any financial entities held by the NOFHC, while the business plan of the bank should be realistic and viable, besides it should address how the bank proposes to achieve financial inclusion.