scorecardresearch
Follow Us:
Thursday, April 15, 2021

RBI sets up 5-member panel to screen new bank licences

“The Standing External Advisory Committee (SEAC) comprising eminent persons with experience in banking, financial sector and other relevant areas, will evaluate the applications thereafter. The tenure of this SEAC will be for three years,” the RBI said.

By: ENS Economic Bureau | Mumbai |
March 23, 2021 3:01:41 am
An internal working group of the RBI, last year, proposed an overhaul of the licensing policy for private banks and suggested allowing large corporate and industrial houses to float banks in India after suitable amendments to the Banking Regulation Act.

The Reserve Bank of India (RBI) has set up a five-member committee, headed by former RBI Deputy Governor Shyamala Gopinath, for evaluating applications for universal banks and small finance banks.

The other members of the panel — Standing External Advisory Committee (SEAC) — include RBI Central Board Director Revathy Iyer, National Payments Corporation of India Chairman B Mahapatra, former Canara Bank Chairman T N Manoharan and former Pension Fund Regulatory and Development Authority Chairman Hemant Contractor.

“The Standing External Advisory Committee (SEAC) comprising eminent persons with experience in banking, financial sector and other relevant areas, will evaluate the applications thereafter. The tenure of this SEAC will be for three years,” the RBI said.

An internal working group of the RBI, last year, proposed an overhaul of the licensing policy for private banks and suggested allowing large corporate and industrial houses to float banks in India after suitable amendments to the Banking Regulation Act. Although several large corporate houses had applied for a banking licence in the past, the regulator had rejected these proposals.

However, the RBI has not yet approved or rejected the recommendations of the working group. Former RBI Governor Raghuram Rajan and ex-Deputy Governor Viral Acharya have criticised the proposal to allow corporate houses to float banking entities, saying it will lead to “connected lending” which, according to them, is “invariably disastrous”.

According to the guidelines on on-tap licensing of universal banks issued in August 2016, resident individuals and professionals having 10 years of experience in banking and finance at a senior level are also eligible to promote universal banks. However, large industrial houses are excluded as eligible entities but are permitted to invest in the banks up to 10 per cent.

Explained

Amid plan to overhaul policy

An internal working group of the RBI, last year, proposed an overhaul of licensing policy for private banks and suggested allowing large corporate and industrial houses to float banks in India after suitable amendments to the Banking Regulation Act.

A non-operative financial holding company (NOFHC) has been made non-mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities. Not less than 51 per cent of total paid-up equity capital of the NOFHC should be owned by the promoter/ promoter group, instead being wholly owned by the promoter group. The RBI guidelines say existing specialised activities have been permitted to be continued from a separate entity proposed to be held under the NOFHC subject to prior approval from the RBI and subject to it being ensured that similar activities are not conducted through the bank as well. The initial minimum paid-up voting equity capital for a bank will Rs 500 crore. Thereafter, the bank should have a minimum net worth of Rs 500 crore at all times.

The promoters or the NOFHC should hold a minimum of 40 per cent of the paid-up voting equity capital of the bank, which should be locked-in for five years from the date of commencement of business of the bank. The promoter group shareholding shall be brought down to 15 per cent within a period of 15 years from the date of commencement of business of the bank.

Centre to borrow Rs 20,000 crore ess this fiscal

New Delhi: The government has decided to cancel its Rs 20,000 crore borrowing scheduled for March 26 on review of position of cash balance, the Reserve Bank of India (RBI) said on Monday. This means, the government would be borrowing Rs 20,000 crore less than its target of Rs 12.8 lakh crore announced in the Budget on February 1 for the current fiscal.

As per the revised Issuance Calendar issued on February 1, 2021 for Government of India Dated Securities, the next auction is scheduled to be held on March 26, 2021. “On review of position of cash balance, the Government of India has decided to cancel the above scheduled auction,” the central bank said in a statement.

The government raises money from the market to fund its fiscal deficit through dated securities and treasury bills. —With PTI Inputs

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Business News, download Indian Express App.

  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
Advertisement
Advertisement
Advertisement
Advertisement
x