Reserve Bank of India on Friday said it has received an application from UAE Exchange and Financial Services Ltd to start a universal bank. The non-banking finance company is the first entity to apply for a licence under the guidelines for ‘on-tap’ licensing of universal banks in the private sector.

UAE Exchange & Financial Services was among the 72 entities that had applied for a small finance bank (SFB) licence in February 2015. In September 2015, the RBI gave in-principle approval to only 10 entities, most of them micro-finance institutions, to float SFBs and UAE Exchange & Financial Services was not on the list.

The NBFC is now again trying to get a banking licence. A universal bank is one which offers retail, wholesale and investment banking services under one roof.

Under the guidelines, resident individuals and professionals having 10 years experience in banking and finance at a senior level are eligible to promote universal banks. However, large industrial houses are excluded as eligible entities but are permitted to invest up to 10 per cent in the banks.

Having a non-operative financial holding company (NOFHC) is not mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities.

Not less than 51 per cent of the total paid-up equity capital of the NOFHC has to be owned by the promoter/promoter group, instead of being wholly owned by the promoter group; and existing specialised activities are permitted to be continued from a separate entity proposed to be held under the NOFHC, subject to prior approval from the RBI and subject to it being ensured that similar activities are not conducted through the bank as well.

The initial minimum paid-up voting equity capital for a universal bank has been pegged at ₹500 crore. Thereafter, the bank should have a minimum net worth of ₹500 crore at all times.

The promoter/s and the promoter group/NOFHC, as the case may be, has to hold a minimum of 40 per cent of the paid-up voting equity capital of the bank which is locked-in for a period of five years from the date of commencement of business of the bank. The promoter group shareholding has to be brought down to 15 per cent within a period of 15 years from the date of commencement of business of the bank.

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