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Former public sector bank chiefs and executive directors may find themselves in the thick of things as the Reserve Bank of India (RBI) wants private sector banks which will be set up in the future to have majority of independent directors on their board.
In view of this, veteran bankers who have helmed public sector banks are seen as being pre-eminently placed to take up the responsibility, say analysts.
The RBI has also stipulated that at least 50 per cent of the directors of a non-operating financial holding company (NOFHC), through which entities/groups can set up banks, will be totally independent of the promoter or promoter group entities and their major customers and major suppliers. Hence, former public sector bank chiefs and executive directors will also be in demand as independent directors of NOFHC boards.
The RBI said independent directors in the case of NOFHCs need to have special knowledge or practical experience in respect of one or more of the following matters: accountancy; agriculture, rural economy and co-operation; banking; insurance; economics; finance; and micro, small and medium enterprises.
The race to rope in independent directors by banking licence aspirants seems to have started. Religare Enterprises Ltd, a diversified financial services group and an aspirant for banking licence, on Friday announced the appointment of former Canara Bank Chairman and Managing Director A.C. Mahajan as an independent non-executive director on its board.
The entities/groups that are likely to throw in their hat in the ring to bag a license include: Tata Capital, Aditya Birla Financial Services, Bajaj Finserv, Reliance Industries, Reliance Capital, Religare Enterprises, LIC Housing, Dewan Housing, Shriram Transport Finance, SREI, IDFC, India Post, and IFCI.
At the first stage, the applications for banking licence will be screened by the RBI to ensure prima facie eligibility of the applicants. The central bank may apply additional criteria to determine the suitability of applications, in addition to the ‘fit and proper’ criteria prescribed. Thereafter, the applications will be referred to a High Level Advisory Committee to be set up by the RBI.
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