Rs 500 cr min capital to set up new bank

Mumbai: The Reserve Bank of India (RBI) today unveiled the draft guidelines on new banking licences, pegging the minimum required capital to set up a bank by a corporate at Rs 500 crore while limiting the foreign shareholding at 49 per cent.

"The minimum capital requirement will be Rs 500 crore. Subject to this, the actual capital to be brought in will depend on the business plan of promoters," the Reserve Bank of India (RBI) said in its draft guidelines on new banking licences.

At present, the minimum capital requirement for the banking sector is Rs 300 crore.

The draft norms said the aggregate foreign shareholding in the new bank should not exceed 49 per cent for the first five years.

At present, the foreign shareholding in private sector banks is allowed up to 74 per cent of the paid-up capital.

On the corporate structure, it said the new banks will be set up only through a wholly-owned non-operative holding company (NOHC) to be registered with the Reserve Bank as a non-banking finance company (NBFC) which will hold the bank as well as all the other financial companies in the promoter group.

Private sector entities or groups owned and controlled by Indian promoters, with diversified ownership, sound credentials and integrity and having successful track record of at least 10 years will be eligible to promote banks, it said.

However, entities or groups having significant (10 per cent or more) income or assets or both from real estate, construction and broking activities individually or taken together in the last three years will not be eligible to set up new banks.

At least half the number of directors of non-operating holding company (NOHC) should be independent directors. The corporate structure should be such that it does not impede effective supervision of the bank and the NOHC on a consolidated basis by the Reserve Bank, the draft guidelines by the central bank said.

On the business model, the draft said that it should be realistic and viable and should address the issue of how the bank proposes to achieve the financial inclusion.

The new bank should open at least 25 per cent of its branches in unbanked rural centres, it said.

Also, the new banks should get their shares listed on stock exchanges within two years of licensing.

RBI has invited comments on the draft guidelines from banks, non-banking financial institutions, industrial houses, other institutions and the public at large and the last date for submission of comments is October 30, 2011.

RBI ha come out with a discussion paper on 'Entry of New Banks in the Private Sector' in August 2010 after an following announcement by the Finance Minister Pranab Mukherjee in his Budget speech in the last year.

At present, India has 26 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1721 urban cooperative banks, 31 state cooperative banks, and 371 district central co-operative banks.

Highlights:

* RBI draft norms for new banking licences pegs minimum capital requirement at Rs 500 crore.

* New banks will be set up only through a wholly owned Non-Operative Holding Company, say RBI draft norms.

* The aggregate foreign shareholding in new banks shall not exceed 49 per cent for the first 5 years, say RBI draft norms.

* Private sector entities or groups owned and controlled by Indian promoters, with diversified ownership and having a successful track record of at least 10 years, will be eligible to promote banks:

* The new bank should open at least 25 per cent of its branches in unbanked rural centres, say RBI draft norms.

* New bank needs to get its shares listed on the stock exchanges within two years of licencing, say RBI draft guidelines.

Source: Financial Express