New bank licence norms get tougher as RBI clarifies at length

The Reserve Bank today made getting new bank licences more stringent even as it allowed the aspirants to have the holding and capital structure of the bank-holding company in place within 18 months of getting the in-principle nod, instead of 12 months prescribed earlier.
RBI also said aspirants from the NFBC/insurance spaces will have to get the go-ahead from their regulators concerned like Sebi and Irda and that their views on the same will prevail over the RBI's own views on the proposed non-operative financial holding company (NOFHC), which is the first and foremost criterion for having a bank licence.

"It has been decided to extend the validity period of the in-principle approval from one year to 18 months ... To provide sufficient time for the promoters/promoter groups to comply with various stipulations in the guidelines issued on February 22," RBI said in a circular issued in response to as many as 443 questions from 34 entities.
On the holding and capital structure of NOFHC, RBI said it is not necessary that individual along with his related parties have shareholding in the holding company.
However, if any individual belonging to promoter group chooses to become a promoter of the NOFHC, he can hold only up to 49 per cent of the voting equity shares and under 10 per cent of the total voting equity shares of the NOFHC.

RBI also said it will not be possible for it to issue licences to all eligible applicants, making it tougher for aspirants to enter into the banking fray. RBI will look for very high quality applications to launch new banks.
The RBI also ruled out any specific number of licences that would be given to applicants and a timeline to do so.
"There is no predetermined number. We will be very selective while considering the applications. We will look for very high quality applications," it said, adding "it may, therefore, be not possible to issue licence to all the applicants meeting the eligibility criteria.