Date: 7 January, 2021
The Reserve Bank of India had issued guidelines for licensing of new banks on Jan 22,1993, which are as follows: -
The minimum value to start a bank is 500 crores. To start with a bank, they have to give a minimum paid-up capital of 200 Crores and later when the bank starts functioning, they have to pay an additional capital of 300 Crores. This means that the bank shall have 500 crore all the time.
Private Sector entities must have a successful track record of 10 years and they should own assets worth 5000 crores or more.
Big industrial houses/organizations are not eligible to open a new private bank but they can invest 10% in the banks.
NOFHC/Promoters of the bank have to hold at least 40% of the paid-up capital, which must be locked in for 5 years from the date of commencement of the bank. In any case, the share of the promoter/ NOFHC must be brought down to 15%.
The Foreign Direct Investment (FDI) limit within the bank is selected on the grounds of the FDI Policy implemented within the country.At present, the limit of FDI within the banking sector is 75%. However, the central government is mulling to create it 100%.
The New bank will open a minimum of 25% of their branches in non-bank rural areas.
40% of “Adjusted Net Bank Credit” shall be provided to the Priority Sector Lending by Domestic scheduled commercial banks.
Within 6 years from the date of commencement of the business, the new bank needs to list its shares stock exchanges.
The business plan submitted by the applicant/promoter should be realistic and feasible and address how the bank proposes to attain financial inclusion within the country.
The bank must abide by the rules and regulations given in the Banking Regulation Act,1949.
CRITERIA FOR CHANGING NBFCs (Non-Banking Financial Company) INTO PRIVATE BANKS-
The company should have a minimum net worth of 200 crores and this figure will be raised to 300 crores after 3 years of the bank's opening.
They should have a clean and successful track record as per RBI’s rules and regulations.
The company should be owned or controlled by a major industrial organization or public authority such as local, state or central government.
AAA should be the latest minimum credit ratings of the NBFC.
NBFCs also has to comply with RBI’s guidelines in the following areas –
Lending to the priority sector
NRI equity participation
Foreign equity participation
Lock-in period for contributions made by the promoters
Relationship with promoters and investors
Diluting the promoters' shares once it crosses the minimum specified limit
Some additional criteria: -
The promoters, the proposed bank, and the group companies will agree to the RBI’s consolidated supervision system
The promoters can set up the head offices at any place in India according to their convenience
The bank will not be permitted to establish a mutual fund or subsidiary for a minimum of 3 years after it starts operations
The bank should use the latest infrastructural facilities and equipment such as telecommunications and computers to make sure customers can be provided with services in a cost-efficient way. It should also have a properly functional Customer Grievances Cell.