Final norms on new bank licences after amending Banking Bill

New Delhi, Sep 11 (PTI) The Reserve Bank is likely to
issue the final guidelines for granting bank licences to
corporates only after Parliament approves the Banking Laws
(Amendment) Bill, 2011.
The final guidelines on new banking licences would be
released only after the necessary amendments to the Banking
Laws (Amendment) Bill, which seeks to give more power to the
regulatory powers of the RBI, sources said.
The central bank had last month issued the draft
guidelines which pegged the minimum capital needed to set up a
commercial bank by a corporate house having successful track
record of 10 years at Rs 500 crore.
It is to be noted that the Banking Laws (Amendment) Bill
was introduced in Parliament in March this year.
Sources added that empowering the RBI is essential for
obtaining information about the other businesses of the
corporate houses seeking banking licences in order to protect
depositors' interests.
Banking companies are engaged in multifarious activities
through the medium of associate enterprises. It has,
therefore, become necessary for the Reserve Bank, as the
regulator of the banking companies, to be aware of the
financial impact of the business of such enterprises on the
financial position of the banking companies, sources said.
It is, therefore, proposed to confer power upon the RBI
to call for information and returns from the associate
enterprises of banking companies also and to inspect the same,
sources added.
The amendment seeks to allow the RBI to supersede the
board of a banking company for a total period not exceeding 12
months.
The proposed amendment moved by the government also
exempts mergers and acquisitions in the banking sector from
the scrutiny of the Competition Commission of India.
According to the draft guidelines, companies which are
primarily engaged in the real estate or stock broking will not
be eligible for promoting bank.
"Entities or groups having significant (10 per cent or
more) income or assets or both from real estate, construction
and broking activities individually or taken together in the
last three years will not be eligible to set up new banks,"
the draft said.
On foreign holding, it said the aggregate non-resident
shareholding in the new bank should not exceed 49 per cent for
the first five years.
At present, the foreign shareholding in private sector
banks is allowed up to 74 per cent of the paid-up capital.