Draft RBI norms may deter cos from opening banks

Norms relating to the ownership and listing of new private banks, as proposed in the Reserve Bank of India's (RBI) draft guidelines, may discourage some companies from applying for new banking licences, rating agency Icra said on Monday.

“The requirement to bring down promoter shareholding to 40 per cent and have the bank listed on the stock exchange within two years of receipt of the banking licence could be a challenge, given it would take some time after the receipt of a licence to commence banking operations while managing teething problems, and that capital market conditions prevailing at the time may not be conducive,” it said.

 

The central bank, in its draft guidelines released last month, said promoters’ stakes in new banks through non-operative holding companies should be reduced to 40 per cent within two years. The stake should be further pared to 20 per cent in 10 years and 15 per cent in 12 years. RBI also said new banks should be listed on local bourses within two years of securing a licence.

Icra said in order to provide a level playing field, the activities of the banks' promoters in capital markets and the real estate sector need to be examined and aligned with the existing norms. The consolidation of operations of existing groups that operate through non-banking routes also needs to be addressed, it said.

According to the rating agency, the proposed guideline mandating one fourth of a new bank's branches in rural areas may exert pressure on the profitability of these lenders in the short term.

Icra said a higher capital adequacy ratio would serve as a cushion to depositors against volatilities faced by banks in the start-up phase. RBI has proposed the capital adequacy ratio for new banks at 12 per cent for at least three years, compared with the nine per cent requirement for existing banks.