Corporates with sound credentials can enter banking business, says RBI, issues guidelines
At present, there are 26 public sector banks and 22 private sector banks. Only 35 per cent of India's adult population has accounts with banks and other financial institutions as compared to a global average of 50 per cent.
It is 41 per cent in case of developing economies.
Following the grant of licence, the promoter group, which could be a public sector entity as well, will be required to set up a wholly-owned Non-Operative Financial Holding Company (NOFHC).
The NOFHC is aimed at protecting the banking operation from extraneous factors like other business of the Group i.e., commercial, industrial and financial activities not regulated by financial sector regulators.
To ally fears of conflict of interest that may arise if a corporate entity opens up a bank, the notification said: "The RBI will have to be satisfied that the corporate structure does not impede the financial services entities held by the NOFHC from being ring-fenced, that it would be able to supervise the bank, the NOFHC, and its subsidiaries/joint ventures/associates on a consolidated basis...."
Existing non-banking financial company (NBFC) will be eligible to apply for a bank licence.
If considered eligible, NBFCs may be permitted to promote a new bank or convert themselves into banks, it said.
According to norms, the business plan has to be realistic and viable and should address how the bank proposes to achieve financial inclusion.
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