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Jul 11, 2012 09:21 AM IST | Source: Moneycontrol.com

New banking license: RBI gets feedback on draft guidelines

RBI on Tuesday put up comments/suggestions received from the related parties on the draft guidelines for new banking license in private sector, released on August, 2011. The regulator will consider those suggestions before finalizing the guidelines.


Moneycontrol Bureau


The Reserve Bank of India (RBI) on Tuesday put up comments/suggestions received from the related parties on the draft guidelines for new banking license in private sector, released on August, 2011. Those comments were received from general public, consultants, analysts, industrial / business houses, NBFCs and others. The regulator will consider the feedback before finalizing the guidelines.


The following is the brief synopsis of some key comments/suggestions against the respective provisions included in the draft guidelines:


Corporate structure
Suggestion - The requirement of the Non-operatiove Holding Company (NOHC), to be wholly owned by the promoters may be revisited and diversified shareholding at the NOHC level be permitted to improve corporate governance and avoid regulatory overlap.


Minimum capital requirements and holding by NOHC
Suggestion - The minimum capital required should be Rs.1,000 crore instead of Rs.500 crore. The time for dilution of promoter shareholding to 40% in the bank should be increased from two years to three/five years. The process of dilution can be staggered to a period of 15 years and to permit higher stake (26% to 40%) to promoters/NOHC. The time for dilution of promoters' shareholding should be reckoned from the date of commencement of business instead of date of licensing of the bank.


Eligible promoters
Comments - Respondents sought more clarity on "well diversified group", "promoter group" and "real estate construction". It is also not clear whether entities with indirect government control through shareholding by public financial institutions would be eligible.


Foreign shareholding in the bank
Suggestion - The foreign shareholding in the new banks should be permitted upto a level of 74%. The (investment) cap of non-resident individual / group need to be raised from 5% to 25% to attract strategic investors.


Corporate governance
Suggestion - Infrastructure companies, which are getting converted into banks, should be exempted from mandatory requirements of cash reserve ratio, statutory liquidity ratio,  and priority sector lending in the initial years. Comments - Independent directors in a holding company are redundant.


Business model
Suggestion - With specific target for financial inclusion, head office of (new) banks (not registered office) should be based in a non-metro centre. A phased approach of five years from the commencement of operations to upgrade to modern infrastructure would be realistic for switching over to core banking solution (CBS).


Other conditions
Suggestion -
A period of four-five years should be allowed to new banks to get listed, instead of two years as mentioned in the draft guidelines.  Moreover, the requirement of having 25% of branches in unbanked rural centres should be revised to 15%.

saikat.das@network18online.com

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