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The requirement to have a bank listed on the stock exchange within two years of receipt of the banking licence so that the promoter shareholding comes down to 40 per cent could be a challenge, credit rating agency ICRA said in a note on the draft RBI guidelines for new bank licences.
The challenge emanates from the fact that it would take some time, post-receipt of licence, to commence banking operations while managing teething problems, and that capital market conditions prevailing at the time may not be conducive.
“Some corporate entities may be deterred from applying for banking licences as some of the businesses may not be mature for listing on the stock exchanges,” said ICRA.
Given the proposed restrictions on non-promoter shareholding, it will be difficult for the promoter to dilute its stake to 40 per cent within the first two years. Moreover, supervision of non-financial entities (owned by the same promoter) by the RBI may prove difficult, the note issued by ICRA said.
Level-playing field
Considering the larger issues of financial stability and a level-playing field for all players, ICRA said there may be a case for realignment of guidelines relating to capital market and real estate activities for the existing private banks and for the shareholding of existing promoters who continue to hold over 15 per cent in existing private banks.
Further, realignment of guidelines will be required for the consolidation of operations of the existing groups that continue to operate via non-banking routes.
On improving banking penetration, the rating agency said, given the more profitable nature of urban/metropolitan operations, the entry of new private banks is likely to intensify competition further in these areas.
The requirement of having to open branches in under-banked areas could exert pressures on the profitability of the new banks in the short term even as the stipulation could bring in some improvement on the financial inclusion front, ICRA said.
Referring to the stronger corporate governance structure envisaged in the draft guidelines, the agency said it would serve to further mitigate some of the concerns associated with the entry of corporate entities in the banking sector.
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