Existing players want entry barrier for new banks raised to Rs 1,000 crore

Our Bureau Updated - November 17, 2017 at 11:59 AM.

The momentum towards ushering in new banks appears to be building up.

Nearly a year after putting out draft guidelines for licensing new banks in the private sector, the Reserve Bank of India on Tuesday released the comments it has received from various stakeholders.

Minimum capital

Existing banks and institutions, it appears, want the entry barrier raised. Certain banks and institutions have suggested that the minimum capital required should be Rs 1,000 crore instead of Rs 500 crore.

Further, certain industrial and business houses, non-banking finance companies and an industry body suggested that the time for dilution of promoter shareholding to 40 per cent in the new bank should be increased from two years to a 3-5 year horizon.

There were suggestions to stagger the process of dilution to a period of 15 years and to permit higher stake (26-40 per cent) to promoters/non-operating holding companies (NOHCs).

Certain parties suggested that the schedule for dilution of promoters’ shareholding should be reckoned from the date of commencement of business instead of date of licensing of the bank.

Listing

Stakeholders said two years is too short a period for listing of new banks and four-five years should be provided for the same.

Further, many of them felt that the restriction of not permitting NOHCs to set up any new financial services entity for at least three years should be removed.

Some of the consultants also suggested that if the NOHC or the promoter entity holding the NOHC is listed, listing the banking entity may not be imposed.

Corporate structure

Some stakeholders suggested that the requirement of the NOHC to be wholly owned by the promoters could be revisited, and diversified shareholding at the NOHC level be permitted to improve corporate governance and avoid regulatory overlap.

Certain NBFCs also suggested that existing non-operative investment/holding companies should be allowed to own/hold shares of the NOHC.

Some entities engaged in financial services also suggested that instead of transferring all permitted activities from NBFCs to banks, certain specialised business such as infrastructure and housing finance may be allowed to be continued outside the bank.

> kram@thehindu.co.in

Published on July 10, 2012 16:01