RBI stance signals easier framework for setting up banks, say experts

The Reserve Bank of India’s (RBI’s) position on promoter holding and redressal of issues on holding companies will pave the way for a more conducive regulatory framework to set up banks, experts said.

However, the regulator’s silence on the issue of corporate ownership evoked “surprise”.

The RBI is yet to clearly spell out its position on conversion of non-banking finance companies into banks, he said.

Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services (APAS), said, “To my mind, 26 per cent is a good benchmark, as (the issue of) fear about promoters losing control has been dealt with. The other stakeholders can’t pass a special resolution.”   

Issues surrounding recommendations about the industry’s concerns around NOFHC, listing of small finance banks have been addressed. There was a recommendation that a three-year track record should be considered sufficient for payment banks to convert into a small finance bank. But the RBI has preferred to continue with a requirement of five years, he added.

Karthik Srinivasan, group head, financial sector ratings, ICRA, said the issues that the banking regulator had with promoters of some private banks had been addressed. “It gives clarity on promoter holding (26 per cent),” he said.

As for conversion of finance companies into banks, they could start with two or three professional-run NBFCs. They will need dispensations in areas like priority sector lending to convert into banks.