Mumbai: As a parting gift before his departure from the RBI in September, governor Dr Raghuram Rajan announced his promised major reform of ‘on tap’ licences for Universal Banks.
Large industrial houses have been excluded from applying for ‘on tap’ licences but they can invest in banks up to 10 per cent while foreign shareholding in the bank would be 74 per cent as per the existing FDI limit.
Others who are eligible include those “entities or groups in the private sector that are ‘owned and controlled by residents’ and have a successful track record for at least 10 years.
These entities must also have total assets of Rs 5,000 crore or more and the non-financial business of the group does not account for 40 per cent or more in terms of total assets or in terms of gross income.
“Universal banks are a better choice compared to payment banks or small banks because it can provide full-fledged banking,” said George Antony, managing director, UAE Exchange India on RBI guidelines, adding “We at UAE Exchange India find it really encouraging for NBFCs like ours which has completed over 10 years and is compliant to all other submissions.”
In its much awaited “Guidelines for ‘on tap’ Licensing of Universal Banks in the private sector”, RBI has stipulated that the initial minimum paid-up voting equity capital for a bank should be Rs 500 crore and thereafter, the bank should have a minimum net worth of Rs 500 crore at all times.
There is a ‘Fit and Proper’ criteria that applicant would have to pass for the licensing and the promoter or promoting entity including non-banking financial companies (NBFCs) that are ‘controlled by residents’ would have to have a minimum 10 years of successful track record in banking and finance at senior level, apart from sound financials, credentials and integrity.
RBI had last issued guidelines for licensing of new banks in the private sector on February 22, 2013. The RBI issued in-principle approval to two applicants and they have since established the banks.
It its monetary policy statement in April 2014, RBI had indicated that after issuing in-principle approval for new licences, the central bank will start working on the framework for on-tap licensing as well as differentiated bank licences. On approval process, RBI said that the applications will be referred to a Standing External Advisory Committee (SEAC) to be set up by the Reserve Bank.
