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Clarifications to Queries on Guidelines for Licensing of New Banks in the Private Sector
A. The bank’s credit and investment (other than equity / debt capital instruments of the NOFHC and financial sector entities held under the NOFHC, on which exposure cannot be taken) exposure to financial entities under the NOFHC will be subject to intra group transactions and exposure (ITE) norms [para 2(I)(iii)(c) of the guidelines]. As regards exposure of entities regulated by other financial sector regulators, to the bank and other entities held under NOFHC, such exposures would be in accordance with the rules/regulations of the respective sectoral regulators.
A. At the time of submission of application for the bank licence, the Promoters have to indicate the source of funds. After obtaining the in-principle approval from RBI, the NOFHC may be incorporated and the capital may be mobilised, as required within 18 months from the date of in principle approval and before the commencement of banking business, whichever is earlier.
The assessment of the ‘financial soundness’ and ‘successful track record’ is a matter of judgment, and will have to be determined both on quantitative and qualitative basis; and no specific yardstick/criteria can be spelt out. In making this judgment, consideration will also have to be given to information obtained from the regulators, and enforcement and investigative agencies like Income Tax, CBI, Enforcement Directorate, etc. wherever considered appropriate. Further, the applications received will be subjected to a multi-layered evaluation process, including the High Level Advisory Committee (HLAC). [Paragraph 2(B) of the guidelines]
The assessment of the ‘financial soundness’ and ‘successful track record’ is a matter of judgment, and will have to be determined both on quantitative and qualitative basis; and no specific yardstick/criteria can be spelt out. In making this judgment, consideration will also have to be given to information obtained from the regulators, and enforcement and investigative agencies like Income Tax, CBI, Enforcement Directorate, etc. wherever considered appropriate. Further, the applications received will be subjected to a multi-layered evaluation process, including the High Level Advisory Committee (HLAC). [Paragraph 2(B) of the guidelines]
A. For applying the yardstick / criteria of ‘financial soundness’ and ‘successful track record’, RBI would consider all the businesses / activities of the Promoters / Promoter Group as considered appropriate. [Paragraph 2(B) of the guidelines]
A. The ‘Fit and Proper criteria’, as stipulated at paragraph 2(A) & (B) of the guidelines will be determined based upon the past record and the future plan. No threshold has been prescribed for business misaligned with the banking model.
A. The requirement of the NOFHC is for both financial groups and for corporate groups having a mix of both non–financial and financial services businesses. [Paragraph 2 (C) of the guidelines]
A. The provisions of para 2 (C) (ii) of the guidelines will not apply to entities in the public sector. All the other provisions of the guidelines will apply to the entities in the public sector that promote the NOFHC / bank.
A. Two or more different Promoter groups cannot jointly promote a bank. The NOFHC setting up a bank has to be wholly-owned by a single Promoter Group. Entities other than the Promoters / Promoter Group can hold voting shares in the bank subject to the limitations indicated in Paragraph 2 (K) (ii) and (iii) of the guidelines.
The corporate structure of the NOFHC as given in paragraphs 2 (C) (i), (ii) & (iii) will have to be fully met. 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. [Paragraph 2 (C) (i) & (ii) of the guidelines]
If an existing Promoter Group company including a core investment company of the Group satisfies the above criteria, it can be the NOFHC.
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Page Last Updated on: December 11, 2022
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