said, would be guided by the provisions of the Banking Regulation Act, 1949. “The decision of the RBI in the matter will be final,” the central bank said.
To prevent round-tripping and circular movement of funds in the banking group, the RBI said the financial entities held by the NOFHC should not have any exposure — credit and investments — to promoters or promoter-group entities or individuals associated with the promoter group or the NOFHC. Thus, the NOFHC is aimed at ring-fencing the bank from other financial and non-financial activities of the promoter group.
“The RBI requires certain specialised activities, such as insurance, mutual funds, stock broking, infrastructure debt funds, etc, to be conducted through a separate subsidiary or joint venture or associate structure,” the central bank said. The holding company would be a non-operative entity and registered as an NBFC with the RBI. The bank would be governed by all the existing prudential norms including Basel II and priority sector rules, the RBI said. Applications need to be in by July 1. On a consolidated basis, the holding company will have to maintain minimum capital adequacy ratio under the Basel II norms and under Basel III as well when the guidelines take effect, the RBI said.
Cheques and balances
* Private and public sector entities & NBFCs can apply
* Minimum paid-up equity capital of R500 cr required
* No curbs on brokerages and real estate companies
* NOFHC must cut stake in new bank to 15% in 12 years
* Total foreign stake capped at 49% for first five years
* NOFHC can hold up to 40% for up to 5 years
* Banks must list within 3 years of starting operations