Markets
BSE See NSE See 26,740.39
215.84 (0.81%)

RBI Issues Guidelines For New Banking License

By Vidrum Mehta | 2/25/2013 4:41 PM Monday

The Reserve Bank of India (RBI) came out with its much-awaited final guidelines on the New Banking License. This has come approximately three years from the first announcement in this regard made in the Budget speech of 2010-2011 by the then Finance Minister (Pranab Mukherjee). Since then, there was a discussion paper which was formulated by the RBI and the floor was open for suggestions, feedback and comments on the same. Thereafter, draft guidelines on the licensing were released by the apex bank, and these were also open to accept further views and comments from the industry.

Finally, in December 2012, after some vital amendments to the Banking Bill, the RBI, in consultation with the Government of India, came out with its final guidelines on the new banking license.

Some of the key final guidelines for the licensing of new banks in the private sector are as follows:

  • All companies or groups, whether private or public sector entities, are eligible to set up a bank, however, only through a wholly-owned Non-Operative Financial Holding Company (NOFHC). With this provision, the bank’s business would not be impacted by the company's or group’s existing business.
  • Further, the entity or group should have a past record of sound credentials and integrity. The company should also have healthy financial track records of 10 years. Further, the RBI may also investigate the above matter and check whether every enclosure mentioned by the company is correct. With this, only companies which have a good financial track record, excellent management team and good corporate governance would be eligible for a license.
  • The minimum capital required to start up is Rs 500 crore, of which the NOFHC shall hold a minimum voting stake of 40% of the paid-up equity capital which will be locked in for a period of 5 years. Going ahead, its stake shall be bought down to 15% within 12 years. Also, the aggregate foreign holding in the new bank shall not exceed 49% in the first 5 years. Further, the bank’s shares should be listed on the stock exchange within 3 years of the commencement of its business. This clause would result in better efficiency in the management’s working and their decision-making abilities. 
  • The bank will be governed under various provisions, acts and other guidelines and instructions issued by the RBI.
  • There should be at least 50% independent directors on the Board of the bank. This would help it to take holistic and correct decisions in running its business. Further, if a promoter and its group are from a non-banking background, some of the independent directors would serve as the most important on the board.
  • The NOFHC and the bank should not have any exposure to the promoter group and its other entities. This would insulate the bank from various other risks that are associated with other businesses and check the practice of giving concessions or incentives to the promoter group in case they are in need of funds. Hence, this guideline is of utmost importance.
  • The bank shall open at least 25% of its branches in unbanked areas (population upto 9999 as per the latest census data) and comply with the priority sector lending targets (40% of total advances) and respective sub-targets (Agr, SME, MSME) as applicable to the existing domestic banks. This would further strengthen the overall aim of financial inclusion in the country.
  • Existing NBFCs, if eligible, may be permitted to promote new banks or convert themselves into banks.

Considering all these points and some other relevant conditions, the RBI has said that those entities or groups which wish to apply for a banking license can submit their application on or before July 1, 2013. In order to ensure transparency, the RBI would come out with a list of groups that have applied for the license after the last date of receipt of applications (July 1, 2013).

Post the submission of applications, all of them would be viewed by a high-level advisory committee which would submit their recommendations to the RBI. The final decision would then be taken by the RBI, which would then issue the new banking licenses. We believe that this would at least take 6-8 months (after the submission of applications) and the new licenses may be given in CY2014.

As per media reports, companies like Mahindra and Mahindra Financial Services (MMFS), IDFC, L&T Finance Holdings, Shriram Transport Finance, Reliance Capital and Tata Capital are among the probable candidates to apply for the license.

All in all, with the government on the fast track with the reforms process, this move does not come as much of a surprise. However, the momentum should be continued and the process should be carried through effectively and in a timely manner. While there would be stiff competition, the growth prospects for existing as well as new banks are robust as there is still significant untapped opportunity in banking. Watch this space for updates in this regard.

Find More Articles on: Markets, DSIJ Mindshare, Product, Large Cap

rite aid coupons online click get free coupons
reasons why women cheat why do wifes cheat signs of infidelity
types of women who cheat insight.nestingen.com women cheat on men
abortion clinics los angeles site how early can you terminate a pregnancy
abortion clinics los angeles site how early can you terminate a pregnancy
abortion clinics los angeles maryaltmansblog.com.nobullsoftware.com how early can you terminate a pregnancy
abortion should be illegal emretas.net how much abortion cost
apps for tracking cell phone location go spyware cell phones
prescription discount card cvs coupon deal cvs photo promo codes
abortion options what happens when you get an abortion average cost of abortion
tracking sms on cell phones ps4haber.com text tracking app
abortion clinics in the bronx abortion surgery natural ways to terminate pregnancy
gabapentin 600mg internetsellout.com sildenafil citrate 25mg
viagra discounts coupons markthrice.com prescription drug coupons
abortion pill abortion pill abortion pill
best cell phone spy software searchengineoptimization-seo.net spy gps
what to do when your wife cheated on you click wives who want to cheat
what to do when your wife cheated on you open wives who want to cheat
my boyfriend cheated now what gpatterson.com has my boyfriend cheated on me quiz
dating for married people married and want to cheat how to know if wife has cheated
my ex girlfriend cheated on me blog.artistamobile.com i had a dream my girlfriend cheated on me
unconscious sex stories tolobel.com american sex stories
why people cheat in marriage why do men have affairs cheat
rite aid coupons online click get free coupons
walgreens prints coupon go rx discount
pet rx coupons thatsphucked.com coupon for medication
reasons why women cheat why do wifes cheat signs of infidelity
spyware for phones free site free spyware for cell phone
pfizer viagra coupons read coupons for viagra printable
pfizer viagra coupons read coupons for viagra printable
abortion clinics los angeles first trimester abortion procedure how early can you terminate a pregnancy
mobile tracking app click cell spy phone
apps for tracking cell phone location go spyware cell phones
abortion clinics in the bronx http://abortionpill-online.com natural ways to terminate pregnancy
discount prescription card go rx.com coupons
cvs new prescription coupon click prescription discount card
diprolene site synthroid 200mcg
discount coupon for viagra coupons viagra canada drug pharmacy coupon
discount coupon for viagra blog.alpacanation.com canada drug pharmacy coupon
canada drug pharmacy coupon softballspa.com discount prescription coupons
free prescription drug cards prescription drug coupons prescription coupon
collapse Related Readings collapse
medication coupon free coupons printable online discount pharmacy
medication coupon free coupons printable online discount pharmacy
spyware for phones free mealmixer.com free spyware for cell phone
types of women who cheat insight.nestingen.com women cheat on men
mobile tracking app click cell spy phone
abort clinic site abortion clinics in washington dc
apps for tracking cell phone location open spyware cell phones
prescription discount card deal at cvs cvs photo promo codes
apps for tracking cell phone location open spyware cell phones
tracking sms on cell phones sms text spy text tracking app
discount prescription card walgreens prints coupon codes rx.com coupons
discount prescription card go rx.com coupons
finasteride 1mg verkossa finasteride 1mg propecia
gabapentin 600mg internetsellout.com sildenafil citrate 25mg
viagra.com coupons gallaghermalpractice.com prescription drugs coupons

DSIJ
Mindshare

Overnight Digest – Stocks to look out for on June 30

Overnight Digest – Stocks to look out for on June 30

The stocks which could witness a significant movement on June 30 are Larsen & Toubro, Gati, Sanghvi Movers, Tiger Logistics (India) and GAIL (India).

Bulls charge; Nifty above 8200

Bulls charge; Nifty above 8200

The Indian markets saw superb rally before June F&O expiry session, with Auto, Bankex and Consumer Durables leading the day. The Nifty ended higher by 76 points at 8204 and Sensex was up by 215 points at 26740. Both the indices ended higher by around 0.80-0.95 per cent.

Cabinet comes forward to boost the sectors

Cabinet comes forward to boost the sectors

The mining stocks of Ashapura Minechem, Maithan Alloys, Sandur Manganese, Iron Ores, Indian Metals and Ferro Alloys surged from 5 per cent to 15 per cent after the Union Cabinet cleared a National Mineral Exploration Policy to allow private companies to carry out standalone exploration.

Bajaj Finserv in no mood to comprise, rallies over 5 per cent

Bajaj Finserv in no mood to comprise, rallies over 5 per cent

A part of Bajaj Holding and Investment Limited, Bajaj Finserv on June 29 has rallied over 5 per cent. The company is in talks to buy out the stake of its joint venture partner Allianz SE in its insurance businesses. 

Deccan Gold: The golden stock of small cap

Deccan Gold: The golden stock of small cap

Gold Exploration Company, Deccan Gold Mines on June 29 has surged by over 19 per cent. The company which is operating for the last 10 years was not able to extract gold due to licensing reason. However, according to the top company officials, company will be through in getting a license for Ganajur mines.

Franklin India Bluechip Growth fund - Generating Alpha

Franklin India Bluechip Growth fund  - Generating Alpha

With markets turning volatile and investors forced to embrace the increased volatility, a equity fund managed by a fund manager with stock picking skills is of paramount importance for investors seeking long term capital appreciation while outperforming the benchmark index.

Government clears 7th Pay commission

Government clears 7th Pay commission

The Government has passed 7th pay commission on June 29. The implementation of pay commission will have an impact of more than one lakh crore annually and about 0.7 per cent of GDP.

Mid market commentary June 29

Mid market commentary June 29

Indian markets opened with a gap-up, surged up to our mentioned resistance levels and retreated to trade in negative on an intraday basis.  We had talked of 8190 as the gap filling level for the Nifty. Accordingly Nifty has hit 8187 and started off with the retreat. Currently the benchmark indices remain marginally up with 0.4 per cent gains.

IL&FS Transportation Networks shines on acquisition of equity stake

IL&FS Transportation Networks shines on acquisition of equity stake

IL&FS Transportation Networks acquires 1.02 per cent stake in Noida Toll Bridge. The company has acquired equity stake at Rs 23.5 per share for total consideration of Rs 4.46 crore. It is consolidating investment in road assets, Infrastructure, Leasing and Financial Services. After the acquisition Toll has increased from 25.35 per cent to 26.37 per cent.

L&T Infotech IPO soon on board

L&T Infotech IPO soon on board

Larsen & Toubro Infotech, an information technology arm of L&T is all set to hit the streets with its Initial Public Offering (IPO). L&T on Wednesday proposed an IPO of its subsidiary L&T Infotech where the Red Herring Prospectus filed was approved on June 28.

Subscribe to
Newsletter

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

Market
CHIT CHAT

What is your view on markets today?

200  Characters Remaining.
Please LOGIN  to post your comments or Click here to go back.
g chandra Jun 29 07:50PM
This platform is to learn r what???
g chandra Jun 29 07:45PM
Is nobody here question them?if this is the case no like minded people will come here to learn, share, or participate
g chandra Jun 29 07:42PM
Why these legpullers always bothering who ever tries to help us with some valuable tips...
Niveza India Jun 29 06:34PM
hello everyone !!
Konan Beg Jun 29 03:49PM
plsss mere tatti yellow color ki ho rahe hai ,roz kale color ki tatti hote thi