Over 100 aspirants line up for banking licence, seek clarity

Many large business groups such as Anil Ambani-led Reliance Group, L&T, Mahindras, Birlas, Religare and Videocon have already made public their intentions to apply for the licence

RBI has been flooded with requests for interpretation of its rules for grant of new banking licences and for clarifications on the 'ambiguity' in various areas, as more than 100 entities have evinced initial interest in seeking permission to set up banks.

     
RBI released its guidelines for licensing of new banks in February this year, asking the aspirants to submit their applications by July 1, 2013. Later, the central bank asked all the interested parties to seek any clarifications they might have on the issue by April 10, a deadline that ended last week.

     
Sources close to the development said that more than 100 entities appear to be interested in applying for the licence, going by the quantum of clarifications sought from RBI in this regard.

     
However, only a few new players are likely to be granted banking licences, a senior official said. RBI is widely expected to allow 4-5 new players in an already highly competitive banking sector, he said, while adding that the central bank might issue 8-10 new licences, at the most.

     
Many large business groups such as Anil Ambani-led Reliance Group, L&T, Mahindras, Birlas, Religare and Videocon have already made public their intentions to apply for the licence, while many NBFCs including Shriram group, Indiabulls, India Infoline, IFCI and PFC have also shown interest. Those reported to be interested in banking licence also include Tatas and Mukesh Ambani-led RIL group.

     
Many aspirants have roped in former bank chiefs and other senior bankers from India and abroad as consultants to help them prepare for seeking the licence. Interestingly, a large number of real estate players have shown initial interest despite their financial positions not being entirely in adherence to the norms spelt out by the RBI.

     
After July 1, the last date of application for bank licence, RBI will make public names of all the interested entities. RBI last gave bank licences around a decade back.

     
As of now, RBI has collated all the clarifications sought from it with regard to licensing norms for new banks and they could be made public this week, sources said, while adding that the clarifications could be released as early as tomorrow.

     
However, the Reserve Bank would not make public the names of entities having sought these clarifications.

     
A large number of clarifications could be relating to interpretation of various clauses of the new bank licence norms, as many entities had complained of 'ambiguity' on various fronts in the guidelines. 

 

The applicants from the NBFC space have also sought to know whether RBI would allow conversion of all their Tier-1 branches and locations into bank branches in case of the transfer of their existing activities into various banking functions.

     
They have sought to know what will happen to the Tier 1 branches that are not allowed to be converted to bank branches, sources said.

   
 As per RBI's guidelines, those eligible to apply for banking licence include entities or groups in the private sector, entities in public sector and Non-Banking Financial Companies through a wholly-owned Non-Operative Financial Holding Company (NOFHC).

   
Clarifications have also been sought on the corporate structure of the NOFHC as well. RBI has said the NOFHC shall be wholly owned by the promoters and should hold the bank as well as all the other financial services entities of the group.

     
The applicants have asked for RBI's views on the transfer of ownership of promoters' company investments in other regulated entities such as insurance to the NOFHC. They have sought to know whether the promoter companies would have to take up the issue of change in nominal ownership with the concerned regulators or will this be a deemed approval.

   
Under the Fit and Proper criteria, these applicants would need to have a past record of sound credentials and integrity and be financially sound with a successful track record of 10 years. This is another criteria that has attracted a large number of clarifications, especially about the feedback that RBI might seek from other regulators and agencies in this regard.

     
Besides, clarifications have been sought on a range of procedural issues like the details to be provided in the licence application forms, issues concerning the exact time period that RBI might take in grant of licences, and whether the applicants can be given a provisional licence and then be allowed to meet all the requisite norms to get a final banking licence.