Bank aspirants seek clarity on licence guidelines

* Religare Enterprises,Srei Infrastructure Finance,Shriram Group begin finalising plans to apply for the licence

Written by ENS Economic Bureau | New Delhi | Published:March 15, 2013 1:23 am

Companies applying for new bank licences have asked the Reserve Bank of India if the disinvestment of promoter shares to 15 per cent in 12 years could be relaxed. A host of blue chip companies,including Reliance Capital,Indiabulls,Religare Enterprises,Srei Infrastructure Finance and Shriram Group have begun finalising plans to apply for banking licences. The RBI has set July 1 as the deadline for applications.

“There are concerns over the provision seeking to reduce the minimum shareholding by the NOFHC (non-operative financial holding company) to 15 per cent,” said an executive with a corporate house that plans to apply for a licence,on conditions of anonymity.

According to the RBI guidelines,the NOFHC will initially hold a minimum of 40 per cent of the paid-up voting equity capital of the bank. After a five-year lock-in period,it will have to pare down its stake to 15 per cent in 12 years.

The norms have also made it a prerequisite for new banks to open 25 per cent of the branches in rural areas. “It is a widely accepted practice. But we want to clarify whether the rural branches would have to be operational from Day one when the bank starts or can be opened gradually,” said an official with another company that is planning to apply for a bank licence.

Another contentious issue is the structure of the NOFHC. Many of the bank licence aspirants have raised questions on the exact way it has to be set up and how it would operate. The RBI has said the promoter group would set up a wholly owned NOFHC that would hold the bank and other financial services entities of the group. The aim of the holding company would be to protect the banking operation from risks arising from the group’s other businesses.

A frequent query arising from most companies is the timeline for the exercise as well as the number of licences that would be given out.

Aware that some of the entities have doubts about the final norms,the RBI has also announced that it will issue clarifications and has asked potential applicants to send in their queries by April 10.

“Considering that the clarifications sought would be of wider interest and use for all intending applicants,clarifications will be posted on its web site,” the RBI had said in a recent release. The guidelines for bank licences were issued on February 22.

Questions

* Banking sector hopefuls have asked Reserve Bank of India if the disinvestment of promoter shares to 15 per cent in 12 years could be relaxed

* Seek clarification on whether rural branches would have to be operational from Day 1or whether it can be opened gradually

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