A. The NOFHC shall be wholly owned by entities/groups in the private sector that are ‘owned and controlled by residents’ [as defined in Department of Industrial Policy and Promotion (DIPP) Press Note 2, 3 and 4 of 2009/ FEMA Regulations as amended from time to time], and also subject to capital structure given at paragraph 2 (C) (ii) (a) and (b) of the guidelines. The level of foreign shareholding in these entities should be at such level that does not make them ‘owned and/or controlled’ by non-residents. FIIs/Foreign Private Equity/Foreign investors cannot hold any voting equity shares in the NOFHC as only companies/ entities in the Promoter Group that are owned and controlled by residents in India are allowed to hold the voting equity shares of the NOFHC. [para 2 (A) (i) and para 2 (C) (i) of the guidelines ] The foreign shareholding allowed at the bank level should satisfy the requirements under paragraph 2 (F) of the guidelines.

A. The 5 percent limit on shareholding by any non-resident shareholder would apply at the bank level. The indirect foreign investments through the Promoter Group companies [owned and controlled by residents – paragraph 2 (A) of the guidelines], which would hold the NOFHC, will not be counted for foreign investments in the bank.

The indirect foreign investments through the Promoter Group companies [owned and controlled by residents – paragraph 2 (A) of the guidelines], which would hold the NOFHC, will not be counted for foreign investments in the bank, as only companies/entities in the Promoter Group that are owned and controlled by resident in India are allowed to hold the voting equity shares of NOFHC. [Paragraph 2 (F) of the guidelines]

The indirect foreign investments through the Promoter Group companies [owned and controlled by residents – paragraph 2 (A) of the guidelines], which would hold the NOFHC, will not be counted for foreign investments in the bank, as only companies/entities in the Promoter Group that are owned and controlled by resident in India are allowed to hold the voting equity shares of NOFHC. [Paragraph 2 (F) of the guidelines]

A. The requirement is that the NOFHC has to be wholly owned by entities/ Groups in the private sector that are ‘owned and controlled by residents’ [ as defined in Department of Industrial Policy and Promotion(DIPP) Press Note 2, 3, and 4 of 2009/FEMA Regulations as amended from time to time]. Therefore OCIs cannot hold shares in the NOFHC.

A. The requirement is that the NOFHC has to be wholly owned by entities/ Groups in the private sector that are ‘owned and controlled by residents’ [ as defined in Department of Industrial Policy and Promotion(DIPP) Press Note 2, 3, and 4 of 2009/FEMA Regulations as amended from time to time]. Therefore PIOs cannot hold shares in the NOFHC.

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 [para 2 (K) (iii) of the guidelines].

Any acquisition of shares by persons resident in India or otherwise 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) of the guidelines].

A. OCIs/PIOs will be allowed to become Chairman/CEO of the proposed bank provided they are persons resident in India as per Foreign Exchange Management Act, 1999.

A. Yes. The term ‘major supplier and major customer’ will normally have the same meaning (as defined in footnote 4 at page 7 of the guidelines) throughout the guidelines.

A. (i) The general principle for activities that have to be conducted from within the bank and by NBFCs in the group 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 asset management, 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 Promoter/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 existing business of NBFCs of the Promoter Group setting up/converting into a bank will have to be reorganized accordingly.

(ii) RBI may consider allowing the bank to take over and convert the existing NBFC branches into bank branches only in the Tier 2 to 6 centres. All NBFC branches in Tier 1 centres which would carry out banking business may be permitted to be converted into bank branches and the excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The branches of the bank and NBFC should be distinct and separate. Erstwhile branches of NBFC, retained and converted into bank branches, cannot conduct businesses of the NBFC.

The new bank should have a minimum voting equity capital of `5 billion. However, where an NBFC is permitted to convert into a bank, it should have a minimum networth of ` 5 billion at all times.[para 2(L)(C) of the guidelines].

The new bank should have a minimum voting equity capital of `5 billion. However, where an NBFC is permitted to convert into a bank, it should have a minimum networth of ` 5 billion at all times.[para 2(L)(C) of the guidelines].

A. The minimum capital required for the bank is `5 billion, and the NOFHC is initially required to have atleast 40% shareholding in the bank. The minimum capital of the NOFHC should be such as to meet the above requirements as well as the requirement of holding prescribed capital in other financial sector entities held by the NOFHC as per the norms laid down by the financial sector regulators.[Paragraph 2 (D) of the guidelines]

The general principle for activities that have to be conducted from within the bank and by NBFCs in the group 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 asset management, 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 Promoter/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]. Within these principles, the NBFC converting into the bank is required to divest the activities which the banks are not allowed to undertake departmentally and such activities can be migrated to and conducted from another NBFC/entity. However, lending activities that are not permitted to a bank, or are subject to restrictions, but are not prohibited to NBFCs, such as promoter financing, loans for purchase of land etc. would have to be wound up. This may be completed within a period of 18 months from the date of in-principle approval of before commencement of the banking business, whichever is earlier.

The general principle for activities that have to be conducted from within the bank and by NBFCs in the group 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 asset management, 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 Promoter/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]. Within these principles, the NBFC converting into the bank is required to divest the activities which the banks are not allowed to undertake departmentally and such activities can be migrated to and conducted from another NBFC/entity. However, lending activities that are not permitted to a bank, or are subject to restrictions, but are not prohibited to NBFCs, such as promoter financing, loans for purchase of land etc. would have to be wound up. This may be completed within a period of 18 months from the date of in-principle approval of before commencement of the banking business, whichever is earlier.

A. (179 to 181) The general principle for activities that have to be conducted from within the bank and by NBFCs in the group 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 asset management, 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 Promoter/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].

Within these principles, the NBFC converting into the bank is required to divest the activities which the banks are not allowed to undertake departmentally and such activities can be migrated to and conducted from another NBFC/entity. However, lending activities that are not permitted to a bank, or are subject to restrictions, but are not prohibited to NBFCs, such as promoter financing, loans for purchase of land etc. would have to be wound up. This may be completed within a period of 18 months from the date of in-principle approval of before commencement of the banking business, whichever is earlier.

A. The entities/individuals belonging to the Promoters/Promoter Groups, which would participate in the voting equity shares of the NOFHC, would have to provide the Memorandum and Articles of Association, financial statements for past ten years and Income Tax returns for last three years, as appropriate, at the time of submission of their application. The last available financial statements in respect of other Group entities, which do not participate in the voting equity shares of the NOFHC will also have to be furnished. The details of the Promoters’ direct and indirect interest in various entities/companies/industries and details of credit/other facilities availed by the Promoters/Promoter Group would be required of all entities. [ para 3 of Annex II to the guidelines]

A. The general principle for activities that have to be conducted from within the bank and by NBFCs in the group 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 asset management, 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 Promoter/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]. Within these principles, the activities that are permitted to be undertaken by the bank, such as loans against shares, have to be undertaken by the bank to the extent permitted. Lending activities that are not permitted to a bank or subject to restrictions to a bank cannot be carried out through an NBFC.

A. The transfer of equity holdings by the Promoters/Promoter Group entities in such regulated financial sector entities to the NOFHC, without the transfer of these business of the financial entities to the bank i.e. activities which have to be undertaken by the bank only, will not be in compliance with the provisions at para 2(C) (iv) of the guidelines.

A. (185 & 186)  Consolidated capital funds means the Capital, Reserves and Surplus of the NOFHC determined on the consolidation of its subsidiaries, associates and joint ventures in accordance with the applicable Accounting Standards.

Consolidated capital funds for regulatory purpose means the consolidated regulatory capital of the NOFHC under the regulatory scope of consolidation. (Please refer to the ‘scope of Application’ under Section B of Annex 1 of circular DBOD.No.BP.BC.98 /21.06.201/2011-12 on guidelines on ‘Implementation of Basel III Capital Regulations in India’ dated May 2, 2012 for details on regulatory scope of consolidation. Please also refer to the guidelines for ‘consolidated accounting and other quantitative methods to facilitate consolidated supervision’ contained in circular DBOD.No.BP.BC.72 /21.04.018/2001-02 dated February 25, 2003 in terms of which the NOFHC will have to prepare consolidated financial statements and other consolidated prudential reports.)

This is a cross holding limit in the capital instruments on unconsolidated financial entities which applies on a consolidated basis. The limit ensures that the NOFHC has the continued ability to provide capital support to banking business.

However, since the investment of the NOFHC in the insurance subsidiary is fully deducted from its consolidated capital for prudential purposes such as consolidated capital adequacy, exposure norms etc., the investment of the NOFHC in the capital of its insurance subsidiary is not considered for the purpose of cross holding limit of 10 per cent.

A. (185 & 186)  Consolidated capital funds means the Capital, Reserves and Surplus of the NOFHC determined on the consolidation of its subsidiaries, associates and joint ventures in accordance with the applicable Accounting Standards.

Consolidated capital funds for regulatory purpose means the consolidated regulatory capital of the NOFHC under the regulatory scope of consolidation. (Please refer to the ‘scope of Application’ under Section B of Annex 1 of circular DBOD.No.BP.BC.98 /21.06.201/2011-12 on guidelines on ‘Implementation of Basel III Capital Regulations in India’ dated May 2, 2012 for details on regulatory scope of consolidation. Please also refer to the guidelines for ‘consolidated accounting and other quantitative methods to facilitate consolidated supervision’ contained in circular DBOD.No.BP.BC.72 /21.04.018/2001-02 dated February 25, 2003 in terms of which the NOFHC will have to prepare consolidated financial statements and other consolidated prudential reports.)

This is a cross holding limit in the capital instruments on unconsolidated financial entities which applies on a consolidated basis. The limit ensures that the NOFHC has the continued ability to provide capital support to banking business.

However, since the investment of the NOFHC in the insurance subsidiary is fully deducted from its consolidated capital for prudential purposes such as consolidated capital adequacy, exposure norms etc., the investment of the NOFHC in the capital of its insurance subsidiary is not considered for the purpose of cross holding limit of 10 per cent.

A. (i & ii) If two third of the Promoter Group’s holding in the Indian company is held by a “non-resident promoter”, the company is not controlled by a resident. So long as the non-resident holds two third of the voting equity shares held by the Promoter Group, he controls the Promoter Group’s investment in the Indian company and the fact that he does not have right to appoint a nominee director is irrelevant. The Indian company is therefore not eligible to promote a NOFHC. (iii) It is essential that not less than 51 per cent of the voting equity shares of the NOFHC are to be held by Promoter Group companies in which the public hold not less than 51 per cent of the voting equity shares. A company in which public holds 51 per cent or more of the voting equity shares need not necessarily be listed. For the purpose of these guidelines, ‘public shareholding’ implies that no person along with his relatives (as defined in Section 6 of the Companies Act, 1956) and entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares, by virtue of his shareholding or otherwise, exercises ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) over the company. [ para 2 (C) (ii) of the guidelines]

A. It is essential that clause (b) of para 2(C)(ii) (i.e. not less than 51 per cent of the voting equity shares of the NOFHC to be held by companies in which the public hold not less than 51 per cent of the voting equity shares) is satisfied in all cases. For the purpose of these guidelines, ‘public shareholding’ implies that no person along with his relatives (as defined in Section 6 of the Companies Act, 1956) and entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares, by virtue of his shareholding or otherwise, exercises ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) over the company.If these conditions are satisfied, then the listed non financial services company would comply with the conditions at 2 (C) (ii)(b) of the guidelines.

Yes. It is essential that not less than 51 per cent of the voting equity shares of the NOFHC have to be held by companies in the Promoter Group in which the public hold not less than 51 per cent of the voting equity shares. [para 2(C)(ii)(b) of the guidelines]

Yes. It is essential that not less than 51 per cent of the voting equity shares of the NOFHC have to be held by companies in the Promoter Group in which the public hold not less than 51 per cent of the voting equity shares. [para 2(C)(ii)(b) of the guidelines]

A. (i & ii) The JV NBFC has to be brought under the NOFHC, as it is a regulated financial sector entity, and the Promoters of the NBFC through the 50 per cent equity holding by the NBFC in the JV NBFC have 50 percent ownership and management rights in the JV NBFC. Hence, the Promoters would be deemed to have ‘significant influence’ or ‘control’ (as defined in Accounting Standard-23) over the JV NBFC. [para 2(C)(iv) and(vii) of the guidelines]

A. Infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank has to remain outside the bank, under the NOFHC. The infrastructure financing activities of the Promoters/Promoter Group through the IFC have to be conducted from within the new bank held by the NOFHC.

A. (i) Yes. The relatives (as defined in Section 6 of the Companies Act, 1956) of the individuals (belonging to the Promoter Group) who would participate in the voting equity shares of the NOFHC, have to provide the financial statements for past ten years and Income Tax returns for last three years, as appropriate, at the time of submission of their application. The details of their direct and indirect interest in various entities/ companies/ industries and details of credit/other facilities availed by the Promoters/Promoter Group would be required of all entities. The last available financial statements in respect of other Group entities, which do not participate in the voting equity shares of the NOFHC will also have to be furnished.[para 3 of Annex II to the guidelines] (ii) Yes. The details of the Promoter/ Promoter Group’s direct and indirect interest in various entities/ companies/ industries and details of credit/other facilities availed by them would be required of all entities. While the details of investments made by the Promoters/Promoter Group in the venture capital/ private equity fund/funds need be submitted, information about the investment made by such venture capital / private equity funds need not be submitted.[ para 3 of Annex II to the guidelines]

A. The Promoters/Promoter Group will have to obtain prior approval from the sectoral regulators, required under respective statutes/regulations.

A. Yes.Since all regulated financial sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ will be held under the NOFHC, Company D in the example will be held under NOFHC, if it is a Group company of the Promoters. [Paragraph 2(C)(vii) of the guidelines]

The general principle is that the regulated financial services sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will be held under the NOFHC. While this is a preferred structure, these requirements are subject to the regulations of the respective regulators. The applicants may approach IRDA in this regard. The decision of IRDA will prevail.

The general principle is that the regulated financial services sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will be held under the NOFHC. While this is a preferred structure, these requirements are subject to the regulations of the respective regulators. The applicants may approach IRDA in this regard. The decision of IRDA will prevail.

The general principle is that the regulated financial services sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will be held under the NOFHC. While this is a preferred structure, these requirements are subject to the regulations of the respective regulators. The applicants may approach IRDA in this regard. The decision of IRDA will prevail.

The general principle is that the regulated financial services sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will be held under the NOFHC. While this is a preferred structure, these requirements are subject to the regulations of the respective regulators. The applicants may approach IRDA in this regard. The decision of IRDA will prevail.

The general principle is that the regulated financial services sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will be held under the NOFHC. While this is a preferred structure, these requirements are subject to the regulations of the respective regulators. The applicants may approach IRDA in this regard. The decision of IRDA will prevail.

A. The general principle is that the regulated financial services sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will be held under the NOFHC. While this is a preferred structure, these requirements are subject to the regulations of the respective regulators. The matter has been examined in consultation with SEBI. The applicants may approach SEBI in this regard. The decision of SEBI will prevail.

A. The stipulation that the NOFHC shall not be permitted to set up any new financial services entity for at least three years from the date of commencement of business of NOFHC means that the NOFHC cannot undertake a new financial service activity [para banking activities as defined in Master circular DBOD.No.FSD.BC.24/24.01.001/2012-13 dated July 2, 2012] and those financial services activities that must be undertaken from outside the bank (para 2 (C) (iv) (a)] and set up a new financial services entity for this purpose during the specified period. For the purpose of reorganization of existing business of the Promoter Group to bring all regulated financial services under the NOFHC and to carry out existing business through separate financial entities under the NOFHC as required under the guidelines, [Paragraph 2 (C) (iv) (a) & (b) of the guidelines], the NOFHC would be free to establish new financial services entity. In fact, this process will have to be completed within a period of 18 months from the date of in-principle approval or before the commencement of the banking business, whichever is earlier. If the sectoral regulators viz. SEBI or IRDA, are to specify new norms, the applicants may approach SEBI/IRDA for their approval.

A. The capital requirements for the regulated financial services entities held by the NOFHC shall be as prescribed by the respective sectoral regulators.

A NBFC (Investment Company) will not be brought under the NOFHC. It has to be registered with Reserve Bank of India as a CIC or as a NBFC (Investment Company), as appropriate.

A NBFC (Investment Company) will not be brought under the NOFHC. It has to be registered with Reserve Bank of India as a CIC or as a NBFC (Investment Company), as appropriate.

A.(i) Yes.  As transfer of assets and liabilities to the new bank would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, it will be permitted. However, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank, in order to protect the interests of the deposi

(ii) The assets and liabilities for the purpose of transfer from one entity to another under restructuring of the existing business may be valued as per the relevant provisions of the applicable laws/ regulations. No separate guidelines will be issued by RBI in this regard.

tors.

A. No. No non-resident shareholder, directly or indirectly, individually or in groups, or through subsidiary, associate or joint venture will be permitted to hold 5 per cent or more of the paid-up voting equity capital of the bank for a period of 5 years from the date of commencement of business of the bank. After the expiry of 5 years from the date of commencement of business of the bank, the aggregate foreign shareholding would be as per the extant FDI policy.

If a CEO/Management Team has not been identified at the application stage, names of management team including the CEO would be required to be furnished to the Reserve Bank after grant of in-principle approval.

If a CEO/Management Team has not been identified at the application stage, names of management team including the CEO would be required to be furnished to the Reserve Bank after grant of in-principle approval.

A. The names of the Board of Directors of the NOFHC would be required to be furnished to the Reserve Bank after grant of in-principle approval. [Paragraph 2 (G) (vii) of the guidelines]

A. (i) & (ii)The period of business plan is left to the applicants. The business plan should be realistic and viable. It should address how the bank proposes to achieve financial inclusion. It would be desirable to give business plan covering three to five years.

A. Taxation will be as per the laws/rules of the tax authorities.