The Reserve Bank of India (RBI) has set up a committee for evaluating applications for universal banks and small finance banks. It is a 5-member committee which is headed by former RBI Deputy Governor Shyamala Gopinath.
Key Points
- The other 4 members of the panel Standing External Advisory Committee (SEAC) are National Payments Corporation of India Chairman B Mahapatra, RBI Central Board Director Revathy Iyer, former Pension Fund Regulatory and Development Authority Chairman Hemant Contractor and former Canara Bank Chairman T N Manoharan.
- The SSEAC having persons with experience in banking, financial sector and other relevant areas, will evaluate the applications thereafter.
- The tenure of this SEAC will be for three years.
- Last year, an internal working group of the RBI proposed an overhaul of the licensing policy for private banks and suggested allowing large corporate and industrial houses to float banks in India after suitable amendments to the Banking Regulation Act.
- Although several large corporate houses had applied for a banking licence in the past, the regulator had rejected these proposals.
- However, the RBI has not yet approved or rejected the recommendations of the working group.
- As per the guidelines on on-tap licensing of universal banks issued in August 2016, resident individuals and professionals having 10 years of experience in banking and finance at a senior level are also eligible to promote universal banks. However, large industrial houses are excluded as eligible entities but are permitted to invest in the banks up to 10 percent.
A non-operative financial holding company (NOFHC) has been made non-mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities. Not less than 51 percent of the total paid-up equity capital of the NOFHC should be owned by the promoter/ promoter group, instead of being wholly owned by the promoter group. The RBI guidelines say existing specialized activities have been permitted to be continued from a separate entity proposed to be held under the NOFHC subject to prior approval from the RBI and subject to it being ensured that similar activities are not conducted through the bank as well. The initial minimum paid-up voting equity capital for a bank will Rs 500 crore. Thereafter, the bank should have a minimum net worth of Rs 500 crore at all times.
