Q.118. Promoter / Promoter Groups’ business model and business culture should not be misaligned with the banking model and their business should not potentially put the bank and the banking system at risk on account of group activities such as those which are speculative in nature or subject to high asset price volatility. Businesses / activities that are being considered as speculative or having high asset price volatility may be explicitly clarified.

Q.119. Please elaborate and provide parameters for / specific description / examples of : a. business model and business culture considered by RBI to be misaligned with banking model b. businesses / activities which RBI considers to be speculative in nature or subject to high asset price volatility. These clarifications will be helpful in appreciating RBI’s expectations and for planning future business.

Q.120. On ownership of the NOFHC, Can the company (with > 51 percent public holding) be a Core Investment Company?

Q.121. Does public holding mean (i) Listing is necessary? (ii) Absence of any other large shareholders? (e.g. 2-3 others owning 5-10 percent each)

Q.122. On holding structure, will the transfers of shares to NOFHC be tax exempt?

Q.123. Aligning the existing Group business and ownership structure to the form required by the Guidelines will require transfers of shareholdings and / or business activities within the Group. Such transfers may be liable to income tax, VAT and / or stamp duty. The Financial Holding Working Group Report released by the RBI had recommended amendments to taxation and stamp duty laws to minimise the transition cost of migrating to the Financial Holding Company Structure. This was also reiterated during the discussions in relation to the amendment to the Banking Regulation Act, 1949. Can any relief be expected in this regard ?

Q.124. There may be a one-time tax implication on the transfer of existing financial services entities from their current holding structure to the NOFHC, would the RBI recommend an exemption for such kind of transfers due to the fact that these have been done to comply with regulation?

Q.125. The applicants who go for new bank licence will have to make changes in their structure/ shareholding / asset portfolio. It is submitted that RBI may take up the matter with Ministry of Finance for giving one time dispensation from income tax by way of exemption to applicants who have to restructure their shareholding / assets / portfolio etc. to meet with New Banking licence guidelines.

Q.126. Whether exemption from tax or duties (stamp duty or otherwise) shall be available, which may arise pursuant to any restructuring, which shall be required to be undertaken for complying with the Banking guidelines.

Q.127. The Final Guidelines require Promoters to form an NOFHC and transfer all the regulated financial services activities of the Promoter group under the NOFHC. Also, activities that a bank can do departmentally need to be transferred from multiple regulated financial services entities to the Bank. Both these stipulations require significant restructuring of existing businesses with attendant material tax and stamp duty implications. For a successful and timely adherence to the prescribed guidelines, it would be critical if RBI and Government can provide a one time tax and stamp duty exemption for restructuring undertaken pursuant to these guidelines.