This document outlines draft guidelines for licensing new banks in the private sector in India. Some key points:
1) Only private sector entities owned and controlled by Indian residents will be eligible to promote banks. Promoters must have a successful 10+ year track record running diversified businesses.
2) Promoters will need to set up a Non-Operative Financial Holding Company (NOHC) to hold the bank and other financial entities. The NOHC structure is meant to ringfence banking activities.
3) Initial minimum paid-up capital for new banks is ₹500 crore. The NOHC must hold 40% of the bank's capital for 5 years, reducing to 20
This is a latest development in Indian banking landscape after the Government of India announced the intention to license new commercial banks in private sector. Reserve bank of India, the banking regulator has set the process. This is a milestone development in Indian banking landscape. Final guidelines would be issued by Reserve Bank after necessary dialogue with government.
Indian banking scenario is changing rapidly. The first commercial bank viz Bank of Bengal was set up in Kolkata in 1806, mostly catering the financial needs of merchants. The first state sponsored bank was set up in1955 with State Bank of India taking over the erstwhile Imperial Bank of India. To control the commanding heights of economy , 14 major commercial banks were nationalised in June 1969. Subsequently , in 1980 six more banks were nationalised. With implementation of financial sector reforms, Reserve Bank of India, central bank and the banking regulator launched scheme for licensing new private sector banks, in 1992 and gave license to nine banks. Two more banks were given license in private sector in 2001. In 2010-11 Union Budget, Finance Minister , Government of India, announced to license to new generation private banks to prop up financial inclusion leading to inclusive growth. In the Union Budget 2014-15, the Hon'ble Finance Minister has announced differentiated bank license for setting up Payment Banks and Small Banks. On July 17, 2014, Reserve Bank of India released Draft Guidelines for Licensing of Payments Banks and Small Banks. With setting up of state-of -technology banks, banks in niche areas, the banking scenario in India is heading for a massive transformation.
Licensing new banks in private sector is a bold step in the path of financial sector reforms. In fact the ball was set rolling after the Union Finance Minister in his Budget Speech 2010-11 made a significant announcement that: “RBI is to consider giving some additional banking licenses to private sector players.” The objective is clear and loud: to extend banking outreach, instill competitive efficiency, bring in new technology and achieve inclusive growth.
RBI issued the final “Guidelines for Licensing of New Banks in the Private Sector” in February 2013 after taking into account the important amendments to the Banking Regulation Act, 1949, feedbacks received from the public, and consultation with the Central Government.
An innovative corporate structure of the promoters of banks is prescribed. Entities / groups in the private sector and entities in the public sector shall be eligible to promote a bank through a Non–Operative Financial Holding Company (NOFHC). The corporate structure is designed to ring-fence the banks from spill-over risks from other entities of the group.
Financial inclusion has emerged as major policy plank of the Centre and RBI. The task is challenging with large population and the geographical spread of our country. The data released from the recent Census of India shows that only 54.4 per cent of rural households have access to banking services
RBI received 26 applications for bank license. On the recommendations of a High Powered Committee headed by Dr Bimal Jalan, former RBI Governor, RBI, issued "in principle" approval to two entities viz IDFC ( an NBFC) and Bandhan( NBFC-MFI) to set up banks. Presently they are functioning as NBFCs; they need to obtain license from RBI under Sec 22 of the Banking Regulation Act, 1949.
. The earlier experimentation of bank licensing infused the much needed competition and technology in the banking sector. Notably, the business models adopted by these banks support class banking, profit maximization and risk-taking. Expectedly, the new generation banks would bring an evolutionary change to meet the “needs of modern economy” and alongside “improve access to banking services” to the lower strata of the society.
This is a latest development in Indian banking landscape after the Government of India announced the intention to license new commercial banks in private sector. Reserve bank of India, the banking regulator has set the process. This is a milestone development in Indian banking landscape. Final guidelines would be issued by Reserve Bank after necessary dialogue with government.
Indian banking scenario is changing rapidly. The first commercial bank viz Bank of Bengal was set up in Kolkata in 1806, mostly catering the financial needs of merchants. The first state sponsored bank was set up in1955 with State Bank of India taking over the erstwhile Imperial Bank of India. To control the commanding heights of economy , 14 major commercial banks were nationalised in June 1969. Subsequently , in 1980 six more banks were nationalised. With implementation of financial sector reforms, Reserve Bank of India, central bank and the banking regulator launched scheme for licensing new private sector banks, in 1992 and gave license to nine banks. Two more banks were given license in private sector in 2001. In 2010-11 Union Budget, Finance Minister , Government of India, announced to license to new generation private banks to prop up financial inclusion leading to inclusive growth. In the Union Budget 2014-15, the Hon'ble Finance Minister has announced differentiated bank license for setting up Payment Banks and Small Banks. On July 17, 2014, Reserve Bank of India released Draft Guidelines for Licensing of Payments Banks and Small Banks. With setting up of state-of -technology banks, banks in niche areas, the banking scenario in India is heading for a massive transformation.
Licensing new banks in private sector is a bold step in the path of financial sector reforms. In fact the ball was set rolling after the Union Finance Minister in his Budget Speech 2010-11 made a significant announcement that: “RBI is to consider giving some additional banking licenses to private sector players.” The objective is clear and loud: to extend banking outreach, instill competitive efficiency, bring in new technology and achieve inclusive growth.
RBI issued the final “Guidelines for Licensing of New Banks in the Private Sector” in February 2013 after taking into account the important amendments to the Banking Regulation Act, 1949, feedbacks received from the public, and consultation with the Central Government.
An innovative corporate structure of the promoters of banks is prescribed. Entities / groups in the private sector and entities in the public sector shall be eligible to promote a bank through a Non–Operative Financial Holding Company (NOFHC). The corporate structure is designed to ring-fence the banks from spill-over risks from other entities of the group.
Financial inclusion has emerged as major policy plank of the Centre and RBI. The task is challenging with large population and the geographical spread of our country. The data released from the recent Census of India shows that only 54.4 per cent of rural households have access to banking services
RBI received 26 applications for bank license. On the recommendations of a High Powered Committee headed by Dr Bimal Jalan, former RBI Governor, RBI, issued "in principle" approval to two entities viz IDFC ( an NBFC) and Bandhan( NBFC-MFI) to set up banks. Presently they are functioning as NBFCs; they need to obtain license from RBI under Sec 22 of the Banking Regulation Act, 1949.
. The earlier experimentation of bank licensing infused the much needed competition and technology in the banking sector. Notably, the business models adopted by these banks support class banking, profit maximization and risk-taking. Expectedly, the new generation banks would bring an evolutionary change to meet the “needs of modern economy” and alongside “improve access to banking services” to the lower strata of the society.
In this PowerPoint presentation information about KYC norms are explained briefly which are related to Banking & Insurance Sector.The Concept of Small Accounts is also explained through this Presentation.Those(Small Accounts) are the accounts which can be opened without complying the requirements of KYC.
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956/2013 and is engaged in the business of loans and advances, deposits, acquisition of shares stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. To register NBFC in India, the Company must have approval from Reserve Bank of India.
How to generate more sales in the "look to book" process and beyond. Because the traveller today is searching for more personalized experience, and data can provide crucial consumer insights to travel companies allowing them to provide a much more individually relevant planning experience.
And for the rest of the digital world, in general.
By Skift with help of Boxever, 2014
In this PowerPoint presentation information about KYC norms are explained briefly which are related to Banking & Insurance Sector.The Concept of Small Accounts is also explained through this Presentation.Those(Small Accounts) are the accounts which can be opened without complying the requirements of KYC.
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956/2013 and is engaged in the business of loans and advances, deposits, acquisition of shares stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. To register NBFC in India, the Company must have approval from Reserve Bank of India.
How to generate more sales in the "look to book" process and beyond. Because the traveller today is searching for more personalized experience, and data can provide crucial consumer insights to travel companies allowing them to provide a much more individually relevant planning experience.
And for the rest of the digital world, in general.
By Skift with help of Boxever, 2014
Cluster Project 2 report on Improving the New York TimesKristopherJones
This is the final draft of my group\'s project 2 report. The project charge was to find a way to keep the New York Times in business and to improve revenue.
Internal document with powerful insights, valid for everyone. How the "...art & science of getting journalism to readers..." can go digital. By the world leader! March 2014
History of Non-Banking Financial Companies Classification of Non-Banking Co...Mohammed Jasir PV
History of Non-Banking Financial Companies
Classification of Non-Banking Companies
Classification of Activities of NBFC
Fund Based Activities
Fee Based Activities
Concepts, Growth and Trends of Fee Based And Fund Based Activities.
Large Bank Borrowers - Are they willful defaultersNeha Sharma
The RBI advisory for mandatory provisions of Non-Performing Assets and inclusion of most of the top borrowers in the list of 150 groups covering lakhs of crores of borrowings has brought to surface a very major issue.
Chapter 3 private and multinational banksNayan Vaghela
Need for Privatization of Banks in India, Benefits of Bank Privatization, Guidelines for Private Sector Banks, Banking License Guidelines, Multinational Banks, Problems and Prospects of Overseas branches
Complete Guide on NBFC (Non-Banking Financial Company) RegistrationASC Group
NBFC stands for Non-Banking Financial Company. It is a financial institution that provides banking services without having a banking license. NBFCs typically provide a wide range of financial services, such as lending, investments, financial leasing, hire purchase, insurance, and other related activities.
NON PERFORMING ASSETS – NEED FOR PRAGMATIC & PRACTICAL REGULATORY FRAMEWORK Neha Sharma
The Reserve Bank of India, Indian Banks Association, almost all Public Sector Banks and the Indian businesses are deeply concerned about significant rise in nonperforming assets during last one year. The Indian economy has been passing through unprecedented turbulent times. Many important sectors of the economy have been adversely affected.
The Reserve Bank of India had recently directed to Public Sector Banks as well as Private Sector Banks to downgrade the asset classification of more than 150 borrower accounts, based upon Asset Quality review, to Non- Performing Assets (NPAs). The exposure of banking sector to such borrower accounts was in the range of ` 1,50,000 Crores to ` 2,00,000 Crores.
This study focus on the non banking financial companies in India – a conceptual framework It should be noted that during the 36 month period fromApril1997 to March2000, Crisis downgraded 149 NBFCs due to their deteriorating business and financial risk profiles and credit fundamentals. The stringent regulations, refusals for registration and the notifications regarding the cancellation of the permissions to raise deposits have gradually reduced the fly by night operators. NBFCs are now struggling hard to find reasons for continued existence, strategies for such existence and business areas for growth and earnings. Dr. S. Mahalingam | B. Ashokkumar "Non-Banking Financial Companies in India – A Conceptual Framework" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-6 , October 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33278.pdf Paper Url: https://www.ijtsrd.com/management/marketing-management/33278/nonbanking-financial-companies-in-india-–-a-conceptual-framework/dr-s-mahalingam
Information Day, Sept 2021
Europe begins to reposition itself in the world, by taking on greater responsibility for its own safety and well-being.
The first call for proposals.
This captures the impact of the COVID-19 pandemic on SMB business operations, their financial performance, the actions that they have taken to mitigate the impact of the pandemic. This report was conducted from May 28-31, 2020, and captures the views of more than 30,000 business owners, managers & employees worldwide. The survey aims to provide a point-in-time snapshot of the online SMB sector – more specifically, those with Facebook Business Pages – in 50 countries. NOTE It is not designed to reflect the entire business population of a given country or region.
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Liu He (Harvard MPA´95) compares two global crises: the Great Depression of 1929 and the Great Recession of 2008. This study was published in China in the summer of 2012. The objective of the project was to understand past events in order “to navigate the ongoing financial crisis safely and respond more proactively by learning from history.” With the perspective of an insider who supported Chinese leaders in making choices that allowed China’s economy not only to weather the crisis, but to outperform all other economies since the crisis, he provides a nuanced account of the past and astute clues for the future. While he doesn’t say so, the brute fact is that since the 2008 financial crisis, nearly 40% of all the growth in the global economy has taken place in just one country: China, despite its having only 15% of the world’s population and less than 20% of its income.
Original is at https://book.douban.com/subject/21964791/
BOND Capital is a global technology investment firm that supports visionary founders throughout their life cycle of innovation & growth. BOND’s founding partners have backed industry pioneers such as DocuSign, Peloton, Spotify, Square & Uber.
by Mary, Noah, Mood, Juliet, Daegwon, Paul & the BOND Team.
European Investment Fund, Invest Europe : Data-driven insights about VC-backe...Amalist Client Services
EUR 51bn in nearly 9000 Venture Capital-invested firms in 2007-15 : analyse their characteristics as well as subsequent performance.
VC cannot change the business reality where some firms make it while others cannot, but it can be the deciding factor in a start-up’s road to success. venture capital may not be that impactful for low growth companies.
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Next steps :
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World´s 5th largest population, 9th largest eco & a govt encouraging competition in highly concentrated banking system....by FT Partners, June 2019
(Fintech Industry research from reputed fintech-only house)
By 2018 China had created a $25 trillion capital market with $13 trillion in equity market capitalization on the Hong Kong, Shanghai and Shenzhen stock exchanges and $12 trillion in various fixed income instruments traded in the interbank markets.
China´s asset management industry is beginning to rival that of the US. This report looks at the industry by tracking its past, looking at the present, and predicting its future. April 2019.
This report is based on the views expressed during, and short papers contributed by speakers at, a workshop organised by the Canadian Security Intelligence Service as part of its academic outreach program. Offered as a means to support ongoing discussion, the report does not constitute an analytical document, nor does it represent any formal position of the organisations involved. The workshop was conducted under the Chatham House rule; therefore no attributions are made and the identity of speakers and participants is not disclosed.
Expert Notes series publication No. 2018-05-02
www.canada.ca (May 2018)
Investors put larger sums of money into fewer cos. in this period. €4.4B was deployed across 571 deals. 18 vehicles raised €2.1B. Median fund size at €86M.
European Tech cos (founded 2000 or later) with $1 B valuations - by GP Bullhound, Sept 2017.
Too much money is chasin too few (GOOD) cos. This means there´s a tremendous opportunity for creating new GOOD cos here...!
Over 100 decision-makers working directly on corporate innovation in Fortune 1000 (Americas, Europe, Asia) corporations share their learnings. By 500 Startups.
In the Adani-Hindenburg case, what is SEBI investigating.pptxAdani case
Adani SEBI investigation revealed that the latter had sought information from five foreign jurisdictions concerning the holdings of the firm’s foreign portfolio investors (FPIs) in relation to the alleged violations of the MPS Regulations. Nevertheless, the economic interest of the twelve FPIs based in tax haven jurisdictions still needs to be determined. The Adani Group firms classed these FPIs as public shareholders. According to Hindenburg, FPIs were used to get around regulatory standards.
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
In this masterclass, presented at the Global HR Summit on 5th June 2024, Luan Wise explored the essential features of social media platforms that support talent acquisition, including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok.
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
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This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
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2011 India new banks licenses (draft) guidelines
1. Reserve Bank of India
Draft Guidelines for Licensing of New Banks in the Private Sector
August 29, 2011
Over the last two decades, the Reserve Bank licensed twelve banks in the private sector.
This happened in two phases. Ten banks were licensed on the basis of guidelines issued in
January 1993. The guidelines were revised in January 2001 based on the experience gained from
the functioning of these banks, and fresh applications were invited. The applications received in
response to this invitation were vetted by a High Level Advisory Committee constituted by the
Reserve Bank, and two more licences were issued.
The January 2001 guidelines indicated that the Reserve Bank will consider licensing
more banks after three years following a review of the working of the private sector banks.
However, this was deferred owing to a variety of factors including our experience with the new
banks and the fact that the banking sector was going through a phase of consolidation.
Finance Minister’s Budget Announcement
The Finance Minister made the following announcement in his budget speech for 2010-
11 with regard to licensing of new banks:
“The Indian banking system has emerged unscathed from the crisis. We need to
ensure that the banking system grows in size and sophistication to meet the needs
of a modern economy. Besides, there is a need to extend the geographic coverage
of banks and improve access to banking services. In this context, I am happy to
inform the Honourable Members that the RBI is considering giving some
additional banking licences to private sector players. Non Banking Financial
Companies could also be considered, if they meet the RBI’s eligibility criteria.”
In pursuance of the budget announcement, the Reserve Bank put out a Discussion Paper
on its website in August 2010 inviting feedback and comments. The Discussion Paper
marshalled international practices, Indian experience, as well as the extant ownership and
governance (O&G) guidelines.
1
2. The Discussion Paper covered a swathe of issues. Important among them are the
following:
(i) Eligibility criteria for applicants including importantly whether corporates be made
eligible, and if so under what safeguards?
(ii) Should Non-Banking Financial Companies be allowed to convert themselves into banks
or promote new banks?
(iii)What should be the appropriate entry level capital to attract serious players committed to
financial inclusion?
(iv) What should be the level of promoters’ shareholdings at the initial formative stage of the
bank and what should be the level of promoters’ holding in the long run to ensure
diversified ownership? What should be the time frame for dilution?
(v) With the objective of creating strong domestic banks, what should be the level of foreign
shareholding in the initial stages and within what time frame the extant FDI rules
should become applicable?
The Discussion Paper elicited wide response from the general public, consultants,
existing banks, industrial and business houses, Non-Banking Financial Companies, Micro
Finance Institutions, etc. through emails and letters. There was also extensive discussion in the
media through analytical pieces as well as editorial opinion. The Reserve Bank also held
discussions with important stakeholders viz. Confederation of Indian Industry (CII), Finance
Industry Development Council (FIDC), Indian Banks’ Association (IBA), The Associated
Chambers of Commerce and Industry of India (ASSOCHAM), Federation of Indian Chambers of
Commerce & Industry (FICCI), Indian Merchant Chambers (IMC), Micro Finance Institutions
Network (MFIN), Consultants, All India RRB Officers’ Federation, etc. on October 7 and 8,
2010. The gist of these comments and discussions was placed on the Reserve Bank’s website on
December 23, 2010.
The present draft guidelines on ‘Licensing of New Banks in the Private Sector’ have been
framed taking into account the experience gained from the functioning of the banks licensed
under the guidelines of 1993 and 2001 and the feedback and suggestions received in response to
the Discussion Paper.
2
3. It may be pertinent to mention that certain amendments to the Banking Regulation Act,
1949 are under consideration of the Government of India including a few which are vital for
finalization and implementation of the policy for licensing of new banks in the private sector.
These vital amendments are: removal of restriction of voting rights and concurrently
empowering RBI to approve acquisition of shares and/or voting rights of 5% or more in a bank
to persons who are ‘fit and proper’; empowering RBI to supersede the Board of Directors of a
bank so as to protect depositors’ interest; and facilitating consolidated supervision. 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 only after the Banking Regulation Act is amended as above.
2. Guidelines
(A) Eligible promoters
(i) Only entities / groups in the private sector that are owned and controlled by residents
shall be eligible to promote banks.
(ii) Promoters / promoter groups with diversified ownership, sound credentials and
integrity that have a successful track record for at least 10 years in running their
businesses shall be eligible to promote banks. RBI may seek feedback on applicants on
these aspects from other regulators and enforcement and investigative agencies like
Income Tax, CBI, Enforcement Directorate, etc. as appropriate.
(iii) Banking is essentially based on fiduciary principles as depositors’ money is involved. It
therefore becomes imperative that the fit and proper assessment framework for bank
promoters is much more comprehensive in scope as compared to other sectors. Any
such framework also needs to look into the nature of activities the promoter group of
the bank is predominantly engaged in. There are certain activities, such as real estate
and capital market activities, in particular broking activities which, apart from being
inherently riskier, represent a business model and business culture which are quite
misaligned with a banking model. Post-crisis, there are concerted moves even
internationally to separate banking from proprietary trading. More importantly, in India,
past experience with brokers on the boards of banks has not been satisfactory. It will
therefore be necessary to ensure that any entity/ group undertaking such activities on a
significant scale is not considered for a bank licence. Otherwise there will be real risks
3
4. of the same business approach getting transmitted to the banks as well and it will be
difficult to address this only through regulations. Accordingly, entities/groups that have
significant (10% or more) income or assets or both from/ in such activities, including
real estate construction and broking activities taken together in the last three years, shall
not be eligible to promote banks.
(iv) Applicants will be required to list group companies undertaking key business activities.
(B) Corporate structure
(i) Promoter / promoter groups will be permitted to set up a new bank only through a
wholly-owned Non-Operative Holding Company (NOHC) which will hold the bank as
well as all the other financial services companies regulated by RBI or other financial
sector regulators. The objective is that the Holding Company should ring fence the
regulated financial services activities of the group including the new bank from other
activities of the group i.e., commercial, industrial and financial activities not regulated
by financial sector regulators. Thus, only non-financial services companies / entities
and individuals belonging to the promoter group will be allowed to hold shares in the
NOHC. Financial services companies belonging to the promoter group would be held
by the NOHC and would not have shareholding in it.
(ii) The NOHC will be registered as a non-banking finance company (NBFC) with the
Reserve Bank and will be governed by a separate set of prudential guidelines.
(iii) The NOHC will not be permitted to borrow funds for investing in companies held by it.
It will just be a vehicle to hold the investments in all regulated financial sector entities
on behalf of the promoter/promoter group for regulatory and prudential comfort.
(C) Minimum capital requirements and holding by NOHC
(i) The initial minimum paid-up capital for a new bank shall be `500 crore. The actual
capital to be brought in will depend on the business plan of the promoters.
(ii) The NOHC shall hold a minimum of 40% of the paid-up capital of the bank which shall
be locked in for a period of five years from the date of licensing of the bank.
4
5. (iii) Shareholding by NOHC in the bank in excess of 40% of the total paid-up capital shall
be brought down to 40% within two years from the date of licensing of the bank.
(iv) In the event of the bank raising further capital during the first five years from the date
of licensing, the NOHC should continue to hold 40% of the enhanced capital of the
bank for a period of five years from the date of licensing of the bank. Capital, other
than the holding by NOHC, could be raised through public issue or private placements.
(v) The shareholding by NOHC shall be brought down to 20% of the paid up capital of the
bank within a period of 10 years and to 15% within 12 years from the date of licensing
of the bank and retained at that level thereafter.
(D) Foreign shareholding in the bank
The aggregate non-resident shareholding from FDI, NRIs and FIIs in the new private sector
banks shall not exceed 49% for the first 5 years from the date of licensing of the bank. No non-
resident shareholder, directly or indirectly, individually or in groups, will be permitted to hold
5% or more of the paid up capital of the bank. After the expiry of 5 years from the date of
licensing of the bank, the foreign shareholding would be as per the extant policy. Currently,
foreign shareholding in private sector banks is allowed up to a ceiling of 74% of the paid up
capital.
(E) Corporate governance
(i) To ensure sound corporate governance, it would be required that at least 50% of the
Directors of the NOHC should be totally independent of the promoter / promoter group
entities, their business associates, and their customers and suppliers.
(ii) No financial services entity under the NOHC would be allowed to engage in any
activity that a bank is permitted to undertake departmentally. All such activities, if any,
will have to be moved to the new bank subject to such conditions as RBI may specify.
(iii) RBI will have to be satisfied that the corporate structure does not impede the financial
services under the NOHC from being ring fenced, that it would be able to supervise the
bank and the NOHC on a consolidated basis, and that it will be able to obtain all
required information from the group relevant for this purpose smoothly and promptly.
5
6. (iv) Ownership and management should be separate and distinct in the promoter / promoter
group entities that own or control the NOHC. The management should be professional
with adequate corporate governance standards.
(v) The source of promoters’ / promoter groups’ equity in the NOHC should be transparent
and verifiable.
(F) Business model
(a) Applicants for new bank licences will be required to forward their business plan for
the new banks along with their applications. The business models will have to address
how the bank proposes to achieve financial inclusion.
(b) The business model submitted by the applicant should be realistic and viable. In case
of deviation from the stated business plan after issue of licence, RBI may consider
restricting the bank’s expansion, effecting change in management and imposing other
penal measures as may be necessary.
(G) Other conditions
(i) Shareholding of 5% or more of the paid up capital of the bank by individuals / entities /
groups will be subject to prior approval of RBI.
(ii) No single entity or group of related entities, other than the NOHC, shall have
shareholding or control, directly or indirectly, in excess of 10% of the paid up capital of
the bank.
(iii) The bank shall maintain arm’s length relationship with promoter group entities, their
business associates, and the suppliers and customers of these entities. The exposure of
the bank to any entity in the promoter group shall not exceed 10% and the aggregate
exposure to all the entities in the group shall not exceed 20%, of the paid-up Capital
and Reserves of the bank, subject to compliance with the provisions of Section 20 of
the Banking Regulation Act, 1949. All exposures to promoter group entities will have
to be approved by the Board.
6
7. (iv) In taking a view on whether an entity belongs to a particular promoter group or not or
whether the entities are linked / related to the promoter group, the decision of RBI shall
be final.
(v) The top management of the bank shall have expertise in the financial sector, preferably,
banking.
(vi) The bank should operate on Core Banking Solution (CBS) from the beginning.
(vii) The bank shall make full use of modern infrastructural facilities in office equipments,
computer, telecommunications etc. in order to provide cost-effective customer service.
It should have a high powered Customer Grievances Cell to handle customer
complaints.
(viii) The bank shall get its shares listed on the stock exchanges within two years of licensing
of the bank.
(ix) The bank shall be required to maintain a minimum capital adequacy ratio of 12% for a
minimum period of 3 years after the commencement of its operations subject to such
higher percentage as may be prescribed by RBI from time to time.
(x)
(a) The bank shall comply with the priority sector lending targets and sub-targets as
applicable to other domestic banks, and
(b) The bank shall open at least 25 per cent of its branches in unbanked rural centres
(population up to 9,999 as per 2001 census) to avoid over concentration of their
branches in metropolitan areas and cities which are already having adequate
banking presence.
(xi) The promoters, their group entities, NOHC and the proposed bank shall be subject to the
system of consolidated supervision by the Reserve Bank of India.
(xii) The NOHC shall not be permitted to set up any new financial services entity for at least
three years from the date of licensing.
(xiii) The bank will be governed by the provisions of the Banking Regulation Act, 1949,
Reserve Bank of India Act, 1934, other relevant Statutes and the Directives, Prudential
regulations and other Guidelines/Instructions issued by RBI and other regulators,
including the regulations of SEBI regarding public issues and other guidelines
applicable to listed banking companies.
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8. (xiv) The promoter / promoter group with an existing NBFC, if considered eligible for a bank
licence, will have two options:
(a) Promote a new bank, if some or all the activities undertaken by it are not permitted
to be undertaken by banks departmentally. In such cases, the activities undertaken
by the NBFC which banks are allowed to undertake departmentally, will have to
be transferred to the new bank, or
(b) Convert itself into a bank, if all the activities undertaken by it are allowed to be
undertaken by a bank departmentally.
Under both options, the promoters will have to first set up a NOHC. Reserve Bank will
consider allowing the new bank to take over and convert the existing NBFC branches
into bank branches only in the Tier 3 to 6 centres. Existing branches of the NBFC in
Tier 1 and 2 centres may be allowed to convert into bank branches only with the prior
approval of RBI and subject to the existing rules / methodology applicable to domestic
banks regarding opening of branches in these centres and also subject to maintaining
25% of the bank branches in unbanked rural centres (population up to 9,999 as per
2001 census) required of all new banks as specified in G(x) (b) above.
(H) Additional considerations in respect of promoter groups having 40% or more assets /
income from non financial business
(a) In respect of promoter groups having 40% or more assets / income from non financial
business, the following additional requirements will be applicable:
(i) The Board of the bank should have a majority of independent Directors.
(ii) The exposure of the bank to any entity in the promoter group, their business
associates, major suppliers and customers shall not exceed 10% and aggregate
exposure to such entities shall not exceed 20% of the paid up Capital and
Reserves of the bank, subject to compliance with the provisions of Section 20 of
the Banking Regulation Act, 1949. All exposures will have to be approved by the
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9. Board and all credit facilities to these entities should have a minimum tangible
security cover of 150%.
(iii) The bank will have to file a return, certified by statutory auditors, on quarterly
basis of all exposures including credit facilities extended to the entities in the
promoter group, their business associates, and major suppliers and customers for
amounts in excess of `1 crore.
(iv) Banks would be required to seek prior approval of RBI for raising paid-up capital
beyond `1000 crore for every block of `500 crore. While examining such
proposals, the RBI shall primarily look into whether the bank has indulged in
connected lending and self dealing, whether the corporate governance standards
are adequate, whether information from promoter group has been forthcoming to
facilitate consolidated supervision and whether the Board members remain ‘Fit
and Proper’.
(b) If RBI is not satisfied about compliance with the above provisions, it would take severe
deterrent action as per law and licensing conditions.
3. Procedure for RBI decisions
(i) In view of the increasing emphasis on stringent prudential norms, transparency,
disclosure requirements and modern technology, the new banks need to have strength
and efficiency to work profitably in a highly competitive environment.
(ii) Banking being a highly leveraged business, licences shall be issued on a very selective
basis to those who conform to the above requirements, who have an impeccable track
record and who are likely to conform to the best international and domestic standards of
customer service and efficiency. Therefore, it may not be possible for Reserve Bank to
issue licences to all the applicants meeting the eligibility criteria prescribed above.
(iii) At the first stage, the applications will be screened by RBI to ensure prima facie
eligibility of the applicants. RBI may apply additional criteria to determine the
suitability of applications, in addition to the minimum criteria prescribed at 2(A).
Thereafter, the applications will be referred to a High Level Advisory Committee to be
set up by RBI.
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10. (iv) The High Level Advisory Committee will comprise eminent personalities with
experience in banking, financial sector and other relevant areas.
(v) The High Level Advisory Committee will set up its own procedures for screening the
applications. The Committee will reserve the right to call for more information as well
as have discussions with any applicant/s and seek clarification on any issue as required
by it. The Committee will submit its recommendations to RBI for consideration. The
decision to issue an in-principle approval for setting up of a bank will be taken by RBI.
RBI’s decision will be final.
(vi) In order to ensure transparency, the names of the applicants and all details submitted
along with the application for new bank licences will be placed on the RBI website.
(vii) The validity of the in-principle approval issued by RBI will be one year from the date
of granting in-principle approval and would thereafter lapse automatically. Therefore,
the bank will have to be set up within one year of granting the in-principle approval.
(viii) After issue of the in-principle approval for setting up of a bank, if any adverse features
are noticed subsequently regarding the promoters or the companies/firms with which
the promoters are associated and the group in which they have interest, the Reserve
Bank of India may impose additional conditions and if warranted, it may withdraw the
in-principle approval.
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