Reserve Bank of India:Relaxation Of Norms for on-tap Licenses for Universal Banks

 Reserve Bank of India:Relaxation Of Norms for on-tap Licenses for Universal Banks

RBI for easier bank permits

The Reserve Bank of India (RBI) has proposed a relaxation of norms for on-tap licenses for universal banks, as the banking regulator seeks to open the key economic sector to wider participation.This is first time since the financial industry was opened up in 1991 that the RBI has decided to make the bank licensing process continuous as opposed to a ‘stop-and-go’ approach.

Broad contours

While the broad contours of the norms are in line with guidelines issued for bank licensing in 2013, the central bank has now made it clear that business houses predominantly in financing activities, for example, non-banking financial companies (NBFC) would be preferred.

“Groups in the private sector that are ‘owned and controlled by residents’ and have a successful track record for at least 10 years, provided such a group has total assets of Rs.5,000 crore or more, the non-financial business of the group does not account for 40 per cent or more in terms of total assets or in terms of gross income,” would be eligible as promoters, according to the RBI.

“Preference will be given to promoting entities having diversified shareholding,” according to the central bank. Individuals can also apply for a licence but they should have at least 10 years of experience in banking and finance. The central bank has allowed individuals as well as companies who are directly or indirectly connected with large industrial houses to have 10 per cent stake in a bank, as compared to 5 per cent earlier. However, the regulator said such shareholders should not have any director on the board of the bank on account of shareholder agreements or otherwise. The initial capital requirement to open a bank has been set at Rs.500 crore and the entity has to maintain 13 per cent capital adequacy ratio for three years.

Source:The Hindu