Guidelines Out
RBI Welcomes
New Banks, With Caution
Key features of the guidelines are:
ü
Eligible Promoters: Entities / groups in the
private sector, entities in public sector and Non-Banking Financial Companies
(NBFCs) shall be eligible to set up a bank through a wholly-owned Non-Operative
Financial Holding Company (NOFHC).
ü
‘Fit and Proper’ criteria: Entities / groups should
have a past record of sound credentials and integrity, be financially sound
with a successful track record of 10 years. For this purpose, RBI may seek
feedback from other regulators and enforcement and investigative agencies.
ü
Corporate structure of the NOFHC: The NOFHC shall be wholly
owned by the Promoter / Promoter Group. The NOFHC shall hold the bank as well
as all the other financial services entities of the group.
ü
Minimum voting equity capital requirements for
banks and shareholding by NOFHC: The initial minimum paid-up voting equity
capital for a bank shall be `5 billion. The NOFHC
shall initially hold a minimum of 40 per cent of the paid-up voting equity
capital of the bank which shall be locked in for a period of five years and
which shall be brought down to 15 per cent within 12 years. The bank shall get
its shares listed on the stock exchanges within three years of the commencement
of business by the bank.
ü
Regulatory framework: The bank will be governed by
the provisions of the relevant Acts, relevant Statutes and the Directives,
Prudential regulations and other Guidelines/Instructions issued by RBI and
other regulators. The NOFHC shall be registered as a non-banking finance
company (NBFC) with the RBI and will be governed by a separate set of
directions issued by RBI.
ü
Foreign shareholding in the bank: The aggregate non-resident
shareholding in the new bank shall not exceed 49% for the first 5 years after
which it will be as per the extant policy.
ü
Corporate governance of NOFHC: At least 50% of the
Directors of the NOFHC should be independent directors. The corporate structure
should not impede effective supervision of the bank and the NOFHC on a
consolidated basis by RBI.
ü
Prudential norms for the NOFHC: The prudential norms will be
applied to NOFHC both on stand-alone as well as on a consolidated basis and the
norms would be on similar lines as that of the bank.
ü
Exposure norms: The NOFHC and the bank shall
not have any exposure to the Promoter Group. The bank shall not invest in the
equity / debt capital instruments of any financial entities held by the NOFHC.
ü
Business Plan for the bank: The business plan should be
realistic and viable and should address how the bank proposes to achieve
financial inclusion.
ü Other
conditions for the bank:
·
The Board of the bank should have a majority of independent
Directors.
·
The bank shall open at least 25 per cent of its branches in
unbanked rural centres (population upto 9,999 as per the latest census)
·
The bank shall comply with the priority sector lending targets and
sub-targets as applicable to the existing domestic banks.
·
Banks promoted by groups having 40 per cent or more assets/income
from non-financial business will require RBI’s prior approval for raising
paid-up voting equity capital beyond `10 billion for
every block of `5 billion.
·
Any non-compliance of terms and conditions will attract penal
measures including cancellation of licence of the bank.
ü
Additional conditions for NBFCs promoting /
converting into a bank: Existing NBFCs, if considered eligible, may be permitted to
promote a new bank or convert themselves into banks.
ü Procedure for RBI decisions:
·
At the first stage, the applications will be screened by the
Reserve Bank. Thereafter, the applications will be referred to a High Level Advisory
Committee, the constitution of which will be announced shortly.
·
The Committee will submit its recommendations to the Reserve Bank.
The decision to issue an in-principle approval for setting up of a bank will be
taken by the Reserve Bank.
·
The validity of the in-principle approval issued by the Reserve
Bank will be one year.
·
In order to ensure transparency, the names of the applicants will
be placed on the Reserve Bank website after the last date of receipt of
applications.
