RBI Norms

The Reserve Bank of India (RBI) on Friday unveiled norms for the entry of a third set of private banks into the Rs.73 trillion banking sector, three years after the government first announced the plan and nine years after it issued the last round of licences.

• The minimum capital required by applicants for licences is Rs.500 crore, and foreign shareholding in the new banks will be capped at 49% for the first five years.
• RBI has removed a ban on brokerages and realtors from applying for a banking licence
• Promoter groups should have a past record of sound credentials and integrity, should be financially sound, and have a successful track record of running their business for at least 10 years
• They need to list their shares on stock exchanges within three years of starting operations.
• The holding company should own a minimum 40% of the equity capital in the bank, which has to be reduced to 15% in 12 years.

The list includes L&T Finance Holdings Ltd, India Infoline Ltd, Religare Enterprises Ltd, Aditya Birla Financial Services Group, Mahindra and Mahindra Financial Services Ltd, LIC Housing Finance Ltd, Shriram Transport Finance Co. Ltd, Bandhan Financial Services Pvt. Ltd, Janalakshmi Financial Services Pvt. Ltd, Tata Capital Ltd, Muthoot Finance Ltd, IDFC Ltd, Reliance Capital Ltd, India Infrastructure Finance Co. Ltd, Bajaj Finserv Ltd, SKS Microfinance Ltd and Srei Infrastructure Finance Ltd

Past experience

Following the nationalization of 14 large banks in 1969 and another six in 1980, RBI has so far given licences to just 12 banks in two phases, including the conversion of a cooperative bank into a commercial bank in the first.

In the first round, RBI issued licences to 10 private sector banks in 1993-94, shortly after the nation embraced economic liberalization under the P.V. Narasimha Rao government.

These were Global Trust Bank Ltd, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Bank of Punjab,IndusInd Bank Ltd, Centurion Bank Ltd, IDBI Bank Ltd, Times Bank and Development Credit Bank Ltd.

In 2003-04, RBI issued licences to two more banks—Kotak Mahindra Bank Ltd and Yes Bank Ltd..