The RBI today made a few concessions to aspirants intending to float banks. One, it extended the validity period of the in-principle approval to promoter/promoter groups for setting up a bank from 12 to 18 months. Two, it decided to grant the new entities more time to meet priority sector lending norms.
In its clarifications to queries on the Guidelines for New Bank Licences, the Reserve Bank of India said the extension is to ensure that the bank licence applicants had enough time to put together a wholly-owned Non-Operative Financial Holding Company (NOFHC) which, in turn, will float a bank.
A single resident promoter/promoter group has first to set up a wholly-owned NOFHC, which will hold the bank and other regulated financial services entities/companies in which the promoter group has ‘significant influence’ or ‘control’.
At least 51 per cent of the voting equity shares of the NOFHC has to be held by companies in the promoter group.
Public holding in these companies should be no less than 51 per cent of their voting equity.
The newly set up banks will have time, ranging from 33 months to 37 months, from the grant of in-principle approval, to achieve the priority sector lending (to agriculture, micro and small enterprises, micro-credit, education, housing and weaker sections) target.
The central bank, however, did not grant any exemption in maintaining the cash reserve ratio (the slice of deposits banks have to park with the RBI) and the statutory liquidity ratio (a portion of deposits banks must park in Central and State government securities).
In order that promoter/promoter groups stay focussed on the bank’s growth, the RBI will not permit them to set up any new financial services entity within three years from the NOFHC’s date of commencement of business.
As lending activities must be conducted from inside the bank, the RBI said the activity of a housing finance company (HFC) promoted by a bank licence aspirant should be transferred to the bank under the NOFHC.
The financial sector regulated entity that holds the HFC substantially will also have to come under the NOFHC.
For non-banking finance companies (NBFC) setting up a bank through an NOFHC, the RBI may consider allowing the bank to take over and convert NBFC branches into bank branches only in the Tier 2 to Tier 6 centres.
In all, the central bank received 443 queries from 34 individuals/organisations regarding Guidelines for Licensing of New Banks in the Private Sector.
Last date
The receipt of applications for new bank licences closes on July 1.
Among the aspirants are Aditya Birla Financial Services, Reliance Capital, Bajaj Finance, Tata Capital, and Religare.