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Clarifications to Queries on Guidelines for Licensing of New Banks in the Private Sector
A. The requirement is that the NOFHC has to be wholly owned by the Promoters/Promoter Group. Further, at least 51 percent of the voting equity shares of the NOFHC have to be held by companies in the Promoter Group in which public hold not less than 51 percent of the voting equity of those companies. A company in which public holds 51 per cent need not necessarily be listed.[para 2 (C) (i) & (ii) of the guidelines]
A. Yes. A listed CIC in the Promoter Group can have a 100 percent shareholding in the NOFHC, provided the public hold not less than 51 percent of the voting equity shares in the CIC. [para 2 (C) (ii)(b) and 2 C (iii) of the guidelines]
A. A promoter group company where the public holding is greater than 51 per cent can have a 100 percent shareholding in the NOFHC. [para 2 (C) (ii) (a) and (b) of the guidelines]
A. The guidelines require that:
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all regulated financial services entities of the Promoters/Promoter Group in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) should be carried on only through entities held by the NOFHC.
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no entity in which the NOFHC has a shareholding can hold shares in the NOFHC.
Therefore, there cannot be a company involved in the financial sector which is on top of the NOFHC and is a 100 percent promoter of the NOFHC.
Lending activities must be conducted from inside the bank. Therefore, the housing finance activity of the HFC should be transferred to the bank under the NOFHC. The financial sector regulated entity which holds the HFC substantially will have to come under the NOFHC.[para 2(C)(iii) of the guidelines]
Lending activities must be conducted from inside the bank. Therefore, the housing finance activity of the HFC should be transferred to the bank under the NOFHC. The financial sector regulated entity which holds the HFC substantially will have to come under the NOFHC.[para 2(C)(iii) of the guidelines]
A. No. Such an entity cannot promote a NOFHC because lending activities must be conducted from inside the bank. Therefore, the retail mortgage lending activity of the entity should be transferred to the bank under the NOFHC. Further, all regulated financial services entities of the Group in which the Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held by a NOFHC. [para 2 (C)(iii) and (vii) of the guidelines]
A. Entities, in which the Government / Public Sector Undertaking / Government Companies’ shareholding is less than 50 percent, would be treated as private sector entities, provided there are no explicit or implicit agreements or arrangements through which Government can exercise control. [para 2 (A) (i) of the guidelines]
Whether a public financial institution is part of the Promoter Group will depend upon whether it is in effective control of the NOFHC to the exclusion of any other person.
Whether a public financial institution is part of the Promoter Group will depend upon whether it is in effective control of the NOFHC to the exclusion of any other person.
The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]
The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]
The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]
The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]
The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]
The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]
The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]
A. (i) No. The NOFHC has to be wholly owned by a single Promoter/Promoter Group (as per the definition given in Annex I to the guidelines) and the pattern of shareholding would be as per the provisions laid down at par 2(C)(ii) & (iii) of the guidelines. Two or more separate groups cannot combine together to set up a NOFHC.
(ii) & (iii) A strategic shareholder not being a part of the Promoter Group, can be a shareholder in a company belonging to the Promoter Group (as per definition in Annex I to the guidelines), which holds shares in the NOFHC. If the strategic partner is in control of the company and is not a resident, then the company cannot hold shares in the NOFHC, as NOFHC has to be owned and controlled by residents. The strategic partner cannot be considered as part of the public shareholding, if he, by virtue of his shareholding or otherwise, exercises significant influence and control over the company.
A. Yes. However, no single entity or group of related entities, other than the NOFHC, shall have shareholding or control, directly or indirectly, in excess of 10 per cent of the paid-up voting equity capital of the bank and any acquisition of shares which will take the aggregate holding of an individual / entity / group to the equivalent of 5 per cent or more of the paid-up voting equity capital of the bank, will require prior approval of RBI. [ para 2 (K)(ii)(iii) of the guidelines ]
A. No. The NOFHC has to be wholly owned by a single Promoter/Promoter Group (as per the definition given in Annex I to the guidelines and the pattern of shareholding would be as per the provisions laid down at para 2(C)(ii) & (iii) of the guidelines. Two or more different promoter groups cannot combine together to set up an NOFHC.
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Page Last Updated on: December 11, 2022
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