23 February 2013

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Know 16 facts about RBI Guidelines for Licensing of New Banks in the Private Sector

Know 16  facts  about RBI Guidelines for Licensing of New Banks in the Private Sector

All domestic private and public companies including NBFCs are eligible.

Bank should not have any exposure to the promoter group.

10 Year Track record sound credentials and integrity essential

Rs.500 Crore is the initial minimum paid up voting equity capital

40% Minimum is the paid up capital of the bank to be held by the holding company
The holding company should own a minimum 40% of the equity capital in the bank, which has to be reduced to 15% in 12 years.

At least ½  that is 50% of the holding company directors should be independent.

At least ¼  that is 25% of branches should be in unbanked rural centres.
The new banks should open at least 25 per cent of its branches in un-banked rural centres (population up to 9,999 as per the latest census).

Last date for application is July 1
The new banks should be set up under a non-operative financial holding company (NOFHC)

“The bank shall get its shares listed on the stock exchanges within three years of the commencement of business,”

The aggregate foreign shareholding in the new bank would not exceed 49 per cent for the first five years after which it would be as per the extant policy.

The NOFHC and the bank would not have any exposure to the promoter group. “The bank shall not invest in the equity / debt capital instruments of any financial entities held by the NOFHC,”

At the first stage, the applications will be screened by RBI, following which they will be referred to a high-level advisory committee. The decision to issue in-principle approval for setting up a bank will be taken by the central bank following the recommendations of the committee.

An NOFHC will be registered as a non-banking financial company with RBI and will be governed by a separate set of directions issued by the banking regulator. Further, the financial entities held by the holding company will be governed by the respective sector regulators

Following are names of the companies who may apply for the banking license

1)    L&T Finance Holdings Ltd

2)India Infoline Ltd

3)Religare Enterprises Ltd

4)Aditya Birla Financial Services Group

5)Mahindra and Mahindra Financial Services Ltd

6)LIC Housing Finance Ltd

7)Shriram Transport Finance Co. Ltd

8)Bandhan Financial Services Pvt. Ltd

9)Janalakshmi Financial Services Pvt. Ltd

10)Tata Capital Ltd

11)Muthoot Finance Ltd

12)IDFC Ltd

13)Reliance Capital Ltd

14)India Infrastructure Finance Co. Ltd

15)Bajaj Finserv Ltd

16)SKS Microfinance Ltd

17)Srei Infrastructure Finance Ltd

Year 1969 – nationalization of 14 large banks in 1969 and another six in 1980,
RBI has so far given licenses to just 12 banks in two phases, including the conversion of a cooperative bank into a commercial bank in the first.

In the first round, RBI issued licenses to 10 private sector banks in 1993-94
These were

1)Global Trust Bank Ltd

2)ICICI Bank Ltd

3)HDFC Bank Ltd

4)Axis Bank Ltd

5)Bank of Punjab

6)IndusInd Bank Ltd

7)Centurion Bank Ltd

8)IDBI Bank Ltd

9)Times Bank

10)Development Credit Bank Ltd

In 2003-04, RBI issued licenses to two more banks—
Kotak Mahindra Bank Ltd and Yes Bank Ltd.

In February 2000 by swapping shares Times Bank was merged with HDFC Bank.

Global Trust Bank  was forced to merge with Oriental bank because of its exposure to stock markets.
In August 2004  Global Trust Bank was merged with  Oriental Bank of Commerce

June 2005 - Bank of Punjab was acquired by Centurion Bank to form Centurion Bank of Punjab.

May 2008- HDFC Bank took over Centurion Bank of Punjab.

When New Private banks will open or start to work?

If Everything goes  as per guidelines  new Private banks will start their operations from March 2014.

Suggested Reading –

In Depth  RBI Guidelines for Licensing of New Banks in the Private Sector When new banks will start operations

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Saturday, February 23, 2013

Tags – Banking Private License Guidelines 2013