RBI guidelines for 'on tap' Universal Bank licencing: The central bank has stipulated that the new bank shall get its shares listed on the stock exchanges within six years of the commencement of business.
The Reserve Bank of India has stipulated a minimum paid-up equity voting capital of Rs 500 crore for licencing Universal Banks in the private sector.
In a set of guidelines released on Monday for ‘on tap’ licencing of Universal Banks, RBI has said the banks would have to maintain a minimum net worth of Rs 500 crore at all times.
The RBI has stipulated that the new bank shall get its shares listed on the stock exchanges within six years of the commencement of business.
Foreign shareholding would be as per the existing foreign direct investment (FDI) policy subject to the minimum promoter shareholding requirement. At present, the aggregate foreign investment limit is 74 per cent.
Eligible promoters will include individuals/professionals who are ‘residents’ and have 10 years of experience in banking and finance at a senior level.
Entities and groups in the private sector that are ‘owned and controlled by residents’ as as defined in FEMA Regulations, and have a successful track record for at least 10 years, will also be eligible to set up universal banks provided such entity/group has total assets of Rs 5,000 crore or more, the non-financial business of the group does not account for 40 per cent or more in terms of total assets/in terms of gross income.
The guidelines also stipulate that existing non-banking financial companies (NBFCs) that are ‘controlled by residents’ and have a successful track record for at least 10 years are eligible to set up such banks. However, any NBFC, which is a part of the group that has total assets of Rs 5,000 crore or more and that the non-financial business of the group accounts for 40 per cent or more in terms of total assets/in terms of gross income, is not eligible.
Promoter/s and the promoter group or Non-Operative Financial Holding Company (NOFHC) shall hold a minimum of 40 per cent of the paid-up voting equity capital of the bank which shall be locked-in for a period of five years from the date of commencement of business of the bank. The promoter group shareholding shall be brought down to 15 per cent within a period of 15 years from the date of commencement of business of the bank.
The bank shall open at least 25 per cent of its branches in unbanked rural centres (population up to 9,999 as per the latest census). The bank shall comply with the priority sector lending targets and sub-targets as applicable to the existing domestic scheduled commercial banks. The board of the bank should have a majority of independent directors.
The new ‘on tap’ licencing would replace the earlier ‘stop and go’ licencing policy which will provide a continuous authorisation policy to the central bank and increase the level of competition in the banking sector as well as ushering in new ideas.
The RBI had last issued guidelines for licencing new private sector banks in on February 22, 2013. Consequently, it had issued in-principle approval to two applicants and they have since established the banks.