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.