Highlights: Guidelines for Licensing of New Banks in the Private Sector

The Reserve Bank of India (RBI) on February 22, 2013 released the final guidelines for issuing new bank licences, paving the way for corporate firms to enter the sector.

Following are the highlights of the Reserve Bank of India's guidelines for licensing of new banks in the private sector:

- Corporates, PSUs and NBFCs can set up a bank.
- No bar on entities in sectors like brokerage, realty.
- Minimum paid-up equity capital to be Rs. 500 crore.
- New banks to get listed within 3 years of business.
- Foreign shareholding in the new bank shall not exceed 49% for the first five years.
- RBI to seek feedback on applicants' background from other regulators, Income Tax, CBI and ED.
- Licence seeker should have 10 years of successful financial track record, sound credentials and integrity.
- To comply with priority sector lending targets; open at least 25 per cent branches in unbanked rural areas.
- Boards to have majority of independent directors.
- Business plan should be realistic, viable and address financial inclusion.
- Applications will be screened by RBI and referred to a high level advisory committee
- To ensure transparency, names of applicants will be placed on RBI's website.
- Last date for applying for the licence is July 1.
- Over the last two decades, RBI licensed 12 banks in private sector.
- New banks were proposed in Budget speech for 2010-11.
- RBI floated first discussion paper on August 2010.

Source : Equity Bulls

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