Tuesday, July 2, 2013

Guidelines for new banking licence

The new guidelines makes entities both from private and public sector eligible to set up a bank through a wholly-owned non-operative financial holding company (NOFHC).
RBI guidelines says,"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. 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".
The groups should have a minimum paid up equity capital of Rs 500 crore. At the start of banking operations, NOFHC should hold a minimum of 40 per cent of the equity capital of the bank with a lock-in period of five years. Later, it has to be brought down to 15 percent within 12 year from that onwards.
The NOFHC will be registered as a non-banking finance company with the RBI while the bank will be governed by the prudential regulations by RBI.
Another condition is that 25% of its branches should be in unbanked rural areas with population upto 9,999.
For the first five years FDI is capped at 49%.

Worth reading