RBI clears decks for on-tap banking, bars big corporates

At present, there are 27 public sector banks and 24 private sector banks in the country. "The licensing window will be open on-tap, and the applications ... could be submitted to the RBI at any point of time," according to the 'Guidelines for 'on tap' Licensing of Universal Banks in the Private Sector' released by RBI. As per guidelines, the initial minimum paid-up voting equity capital for a bank must be Rs 500 crore and it must have a minimum net worth of Rs 500 crore at all times after that. 

"Large industrial houses are excluded as eligible entities but are permitted to invest in the banks up to 10 per cent," the guidelines said. Individuals/professionals who are 'residents' and have 10 years of experience in banking and finance at a senior level and existing non-banking financial companies (NBFCs) that are 'controlled by residents' and have a successful track record for at least 10 years can apply for the licence.

Further, "entities/groups in the private sector that are 'owned and controlled by residents' and have a successful track record for at least 10 years, provided that if such entity/group has total assets of Rs 5,000 crore or more, the non-financial business of the group does not account for 40 per cent or more in terms of total assets/in terms of gross income" are also eligible promoters. The applicant would have to pass the 'Fit and Proper' criteria. According to it, promoter/promoting entity/promoter group should have a past record of sound financials, credentials, integrity and have a minimum 10 years of successful track record.

The foreign shareholding in the bank would be as per the existing FDI. At present, the aggregate foreign investment limit is 74 per cent. While assuming charge on September 4, 2013, Governor Raghuram Rajan had said one of his key reform measures would to put bank licensing on-tap. He fulfilled a part of it in April 2014 by issuing in-principal approvals to two-infra lender IDFC and microfinancier Bandhan, out of 25 applicants.