This is one of the many chang- es the central bank is planning to make in licensing norms for the new set of banks that may be al- lowed to open for business in the next two years or so. In the early 1990s, when RBI allowed the first set of new private banks to start business, they were required to have a net worth of Rs100 crore.
Earlier this decade, when RBI al- lowed two more banks to come into being, the amount was raised to Rs300 crore.
Among other norms, RBI may want at least 25% of the distribu- tion network or branches of an NBFC to be in rural areas and its non-performing assets (or bad loans) to be not more than 2%, a person familiar with the devel- opment said.
Yet another critical criterion is a prospective NBFC's exposure to sensitive sectors such as real estate and capital markets (the less the better). "Besides, the en- tity must have a diversified own- ership," added this person, who did not want to be identified.
To be sure, nothing has been finalized as yet and RBI's inter- nal discussion is at a preliminary stage, he added.
anita.b@livemint.com
Source: Live Mint By Anita Bhoir RBI may raise net worth for new banks
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By ugesh sarkar, Section Banking & RBI
Posted on Thu Jun 24, 2010 at 11:40:15 PM EST
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Finance minister Pranab Mukherjee said while presenting the Budget that RBI was consid- ering issuing banking licences to private sector firms and NBFCs.
Many believed that RBI was not adequately consulted on this; only a few months before the Budget its governor had said that RBI was in no hurry to open up the sector and allow new players.
Following the Budget, RBI, in its annual monetary policy state- ment in April, stated that it would come up with a discus- sion paper by July. It had also said that it would conduct de- tailed discussions with all stake- holders on the discussion paper and finalize guidelines for the li- cences after that.
All applications received in this regard are to be referred to an external expert group for ex- amination; the group is to rec- ommend whether RBI should grant the licences or not.
After the finance minister's announcement, many Indian corporate houses, including the Aditya Birla Group and the Reli- ance-Anil Dhirubhai Ambani Group expressed their intentions of entering the banking space.
Reliance Capital Ltd, Srei In- frastructure Finance Ltd and Muthoot Capital Services Ltd are among the NBFCs keen to be- come a bank.
Interestingly, RBI's existing ownership guidelines, released in 2005, restrict the ownership of large industrial houses in banks to 10%. The guidelines on con- version of NBFCs into banks also do not permit NBFCs promoted by a large industrial house or owned and controlled by public authorities, including local, state or Union governments, from be- coming banks.
After the Budget announce- ment, RBI deputy governor Usha Thorat had said: "We will have to start working on it and...take into account our experience and what is practical."
"There will be new licences. In the last five years we have not given any new licences. Howev- er, while we do this, we will keep in view the basic principles which are already there, mainly diversified shareholding, and fit and proper guidelines," she had said. "The basic principles of ownership and governance will remain unchanged, because that has stood the test of time."
An economist with a large cor- porate house in Mumbai said: "To support India's growth capi- tal, the RBI will have to allow new entrants into the banking space as banks' balance sheet has to expand and this capital cannot come from fiscal coffers."
"Since banks handle public money, the entrants will have to be credible names that would be able to pump in huge capital," he added, asking not to be iden- tified as his group is one of the aspirants for a banking licence.
"The regulations would have to ensure high net worth require- ment and a road map for dilu- tion of holding."
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