Millennium Post

RBI game for on-tap bank licences... with 10% cap for business houses

Moving towards on-tap licensing regime, the Reserve Bank on Thursday proposed allowing professionals with 10 years of experience to promote full-fledged banks but large business houses can come in only as investors with less than 10 per cent stake. The draft guidelines, issued today, may upset the plans of several business houses who had lost out in the last round of distribution of universal bank licences and were eagerly waiting for on-tap regime to set up their own banks.

In a departure from the earlier norms on universal banks, the draft guidelines have made resident individuals and professionals having 10 years of experience in banking and finance as eligible for promoting universal banks. “Large industrial or business houses are excluded as eligible entities but permitted to invest in the banks to the extent of less than 10 per cent” of paid up equity capital, which RBI has fixed at Rs 500 crore, as per the guidelines. “The initial minimum paid-up voting equity capital for a new bank shall be Rs 500 crore and thereafter, the bank shall have a minimum net worth of Rs 500 crore at all times,” the central bank said. 

Finance Bill clears the way for monetary panel on policy rate
The move to strip Reserve Bank Governor of powers to set interest rates by transferring the authority to a broader panel is a step closer to reality with the Lok Sabha on Thursday approving the Finance Bill 2016. The Finance Bill 2016 contained an amendment to the Reserve Bank of India Act of 1934 giving the central bank a mandate to target inflation. “We have drafted the amendment (to the RBI Act) in consultation with the RBI so that inflation is reduced,” Finance Minister Arun Jaitley said in his hour-long reply to the debate on the Bill. 
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