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Clarifications to Queries on Guidelines for Licensing of New Banks in the Private Sector

A. Yes. The financial services entities of the Promoter Group which are not regulated by RBI or any other financial sector regulator cannot be brought under the NOFHC structure. [para 2 (C) (iii) of the guidelines]
A. Yes, subject to regulations relating to rights issues. The shareholding of the NOFHC will be a minimum of 40 per cent of the paid up voting equity capital of the bank which shall be locked in for a period of five years from the date of commencement of the business of the bank. The shareholding in excess of 40 per cent of the total paid up voting equity capital should be brought down to 40 per cent within three years from the date of commencement of business of the bank. [para 2 (D) (ii) and (iii) of the guidelines]
A. There could be common directors in the NOFHC and the bank. [para 2(G)(i) of the guidelines]. A director of the NOFHC cannot be considered as independent director of the bank. The common directorship between the NOFHC and other regulated financial services entities would be as per the regulations of the sectoral regulators concerned. [para 2 G (iv) of the guidelines]
A. No. The bank cannot be incorporated without obtaining ‘in-principle approval’ from the Reserve Bank. The bank will be incorporated as a public limited company.
A. No. The bank cannot be incorporated without obtaining ‘in-principle approval’ from the Reserve Bank. In case in-principle approval is given by the Reserve Bank, the bank should be set up within a period of 18 months from the date of in-principle approval. The same may be mentioned in the Form III.

A. This model is not possible for the following reasons:

(i) The NOFHC should be wholly owned by the Promoters/Promoter Group [para 2(A) of the guidelines].

(ii) If as a result of the share swap, any part of the shareholding of the NOFHC is held by the public, which holds shares in the listed NBFC, then the NOFHC cannot be wholly owned by the Promoters/Promoter Group.

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:

  1. 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.

  2. 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.

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Page Last Updated on: December 11, 2022

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