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Clarifications to Queries on Guidelines for Licensing of New Banks in the Private Sector
A. The NOFHC has to be wholly owned by a 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 paragraph 2(C)(ii) & (iii) of the guidelines. The existing foreign funding institution / Indian Investment Institution who hold shares in the promoting entity of the NOFHC, not being Promoter or belonging to the Promoter Group cannot hold shares in the NOFHC. As regards shareholding in the bank by foreign funding institutions, it should be in consonance with paragraph 2 (F) of the guidelines. Further, no single entity or group of related entities, other than the NOFHC, shall have shareholding or control, directly or indirectly, in excess of 10 percent of the paid-up equity capital of the bank and any such acquisition of 5 per cent or more of the paid up equity capital of the bank will require prior approval of RBI. [Paragraph 2 (K) (ii) and (iii)]
A. Public shareholding would mean, at least 51 percent of the shareholding is widely dispersed among shareholders other than the Promoters and none of such shareholders 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 percent of voting equity shares exercise ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) by virtue of his shareholding or otherwise. Therefore, GDRs / ADRs and their underlying shares would be counted as public shareholding, provided that, by virtue of their shareholding, the holders or their custodians do not have ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) and there are no agreements or other arrangements whereby the GDR / ADR holders or their custodian have undertaken to exercise their voting rights in accordance with the Promoters/management.
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) of the guidelines] and set up a new financial services entity for this purpose during the specified period.
However, adding a new business line within existing business line would be as per the rules and regulations laid down by the concerned financial sector regulator.
A.Yes, but 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 the NOFHC. [para 2 (C) (vi) of the guidelines].
A. Yes, subject to RBI approval and subject to the regulations / approvals of the concerned financial sector regulators.
A. Yes, the shareholding of the NOFHC in the bank can be brought down by a stake sale or dilution or a combination thereof subject to complying with the requirement at para 2(K)(ii) and (iii) of the guidelines.
A. No. Debt mutual funds are not covered under money market instruments. [Para 2(H)(i)(c) of the guidelines].
A. Paragraph 2 (I) (iv) (a) and (b) of the guidelines lay down the overarching principles for the financial entities held by the NOFHC. These entities cannot have any credit and investments (including investments in the equity/debt capital instruments) exposure to the Promoters / Promoter Group entities or individuals associated with the Promoter Group or the NOFHC. These entities cannot make investments in the equity and debt Capital instruments amongst themselves. Apart from these, the exposure norms laid down by the other financial sector regulators will be applicable.
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.
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.
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Page Last Updated on: December 11, 2022
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