While industrial conglomerates can’t set up universal banks, Reserve Bank of India (RBI) guidelines for issuing bank licences on tap allow them to invest up to 10% in these lenders.
But the rules released on Monday create room for banking professionals to turn promoters as they need not form a non-operative financial holding company (NOFHC). Ex-Citibanker Vikram Pandit, for example, would be eligible to set up a bank. While raising the minimum capital of R500 crore might not be too difficult, as the foreign holding can be as high as 74%, analysts caution the disruption due to fintech would make the space a difficult one to operate in.
The RBI also barred non-banking financial companies that belong to a group with total assets or gross income of Rs 5,000 crore or more and which have non-financial businesses accounting for more that 40% of total assets or gross income.
This might keep out players such as Bajaj Finserv, analysts said, given the loan book and the insurance assets would be sizeable, contributing more than the cap of 40% to the group’s assets.
Industry experts were somewhat unclear on the chances of stockbroking firms. In the past, the central bank had not favoured promoters with business interests in real estate and stockbroking.
Individual promoters, promoting entities and converting entities that have other group entities, can set up the bank only through the NOFHC route. In such cases, the promoter or promoter group need to own a minimum 51% in the NOFHC.
In general, promoters or NOFHCs need to own a minimum 40% equity in the bank, with a lock-in period of five years. The holding needs to be brought down to 30% within 10 years and 15% within 15 years.
NBFCs must transfer all lending businesses to the bank, except for specialised businesses such as credit cards. Given statutory requirements are onerous — at least 25% of the branches must be located in unbanked rural centres and priority sector targets will be the same as for existing banks — not too many NBFCs may be keen to make the switchover even if it means the chance to mobilise funds at a much lower cost.
When the RBI last threw open the door for bank licences, there were 24 applications — the Tatas pulled out — of which just two bagged licences, Bandhan and IDFC.