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RBI to allow professionals to set up banks, bars conglomerates

RBI_LOGO_jpg_2388559fThe Reserve Bank of India has proposed new rules for setting up news banks in the country. As per the draft rules, professionals and finance companies will get a chance to set up banks while large business houses and conglomerates will be barred from promoting banks. RBI also proposes large non-banking finance companies the opportunity to convert into banks. According to the proposed rules, professionals with minimum experience of 10 years in banking industry would be allowed to enter into the banking arena. The draft rule proposes to allow entities to enter into banking business with a minimum capital of Rs 500 crore for granting on-tap license to new universal banks which can function like high-street lenders offering loans, accepting deposits and carrying out fee-based services.

According to the draft rules, large business houses and conglomerates having more than 40% of total business from non-financial activities will be barred from promoting banks. Same time, conglomerates with total assets of Rs 5000 crore and having 60% of their business in financial services can apply for a banking license.  while granting new banking license, RBI will give preference to promoting entities with diversified shareholding. As per the draft, promoters’ stake will be locked at 40% for the first five years and a new bank will have to be listed within 6 years. At the end of five years the promoters’ excess stake has to be lowered to 40%, later to 30% in 10 years and 15% in twelve years of operations.

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