Govt to send comments on bank licences to RBI

According to draft norms, business houses with a minimum capital of Rs 500 cr will be allowed to set up commercial banks

The government would soon send its comments to the Reserve Bank of India (RBI) on issuing new bank licences, Finance Minister P Chidambaram said today.

RBI is preparing final guidelines for issuance of new bank licences after Parliament approved the Banking Laws (Amendment) Bill last month.

The Bill aims at strengthening banking regulation. It allows the central bank to supersede boards of private banks and increase the cap on voting rights of private investors in public sector banks to 10 per cent from the one per cent at present.

According to the draft guidelines, business houses with successful track record and a minimum capital of Rs 500 crore will be allowed to set up commercial banks.

Currently, the minimum capital requirement for opening a bank is Rs 300 crore.

The draft guidelines said companies which were primarily engaged in the real estate business or stock broking would not be eligible for promoting bank.

“Entities or groups having significant (10 per cent or more) income or assets or both from real estate, construction and broking activities individually or taken together in the last three years will not be eligible to set up new banks,” the draft said.

On foreign holding, it said the aggregate non-resident shareholding in the new bank should not exceed 49 per cent for the first five years.

At present, the foreign shareholding in private sector banks is allowed up to 74 per cent of the paid-up capital.

Over the last two decades, RBI licensed 12 banks in the private sector in two phases — 10 in 1993 and two later.

There are 26 public sector banks, seven new private sector banks and 15 old private sector banks.