New banking guidelines in two minutes

New banking guidelines in two minutes

Everyone is welcome, but with caveats:

* Corporates, NBFCs and public sector entities can set up banks. Broking and real estate companies can also apply.

* Promoters need to be financially sound with track record of 10 years.

* Positive feedback from other regulators and investigative agencies critical.

Ring fenced structure:

* Promoters must set up banks through wholly-owned non-operative financial holding companies.

* Holding company and bank not permitted to lend or invest in any entity belonging to the promoter group.

* Shares of holding companies cannot be transferred to entities outside the promoter group.

Shareholding in the bank:

* Holding company to hold 40% stake in bank for 5 years.

* Holding company to reduce stake in the bank to 20% in 10 years, 15% in 12 years.

* Foreign shareholding capped at 49% for 5 years.

Capital requirements:

*Minimum paid-up capital of the bank must be Rs 500 crore.

*The bank needs to maintain capital adequacy ratio at 13% for initial 3 years.

*The bank must get listed within 3 years.

Other conditions:

* At least 25% of new branches must be in unbanked rural centres.

* At least 50% of the directors of holding company must be independent directors.

* The bank's board must have a majority of independent directors.

Application process:

* Applications for banking licences need to be submitted by July 1, 2013.

* RBI to issue in-principle approval after considering recommendations from a high level advisory committee.

* The in-principle approval will be valid for 1 year.