New FAQ Page 2 - आरबीआय

RbiAnnouncementWeb

FAQ DetailPage Breadcrumb

Search Bar

Search Results

Clarifications to Queries on Guidelines for Licensing of New Banks in the Private Sector

Q.88. Under clause 2 (C)(vi), the NOFHC is not permitted to set up any new financial services entity for at least 3 years from date of commencement of its business, what does “set-up” envisage? Could minority shareholding be regarded as “set-up”? +

A. Setting-up would mean incorporating a new entity or acquiring shares in an existing entity in which the Promoter Group will have ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) and which carries on regulated financial services business whereby such entities would be required to be a subsidiary, joint venture or associate of the NOFHC. [para 2 (C) (vi) of the guidelines]

Q.89. Can the bank “set-up” new financial services business as subsidiaries/ joint ventures below it with RBI permission? +

A. Normally the bank will not be permitted to set up a subsidiary / joint venture under it. However, a bank may be permitted to set-up a subsidiary / joint venture under it, where it is legally required or specifically permitted by RBI (For example, a banking subsidiary for carrying on the business of banking exclusively outside India). [para 2 (C) (vi) of the guidelines]

Q.90. If the intention to “set-up” new financial services business is mentioned in the application for banking licence made to the RBI, would this be considered / permitted? +

A. Promoters/Promoter Groups will not be permitted to set up any new financial services entity within three years from the date of commencement of business of the NOFHC, even if such intention is mentioned in the applications. [para 2 (C) (vi) of the guidelines]

Q.91. Clause 2(C)(vii) provides that only those regulated financial sector entities in which a Promoter Group has significant influence or control will be held under the NOFHC. Could the Promoter Group continue to hold non-regulated financial services entities over which it has significant influence or control (or otherwise) outside of the NOFHC structure or would it mandatorily be required to divest its holdings? +

A. Yes. The financial services entities of the Promoter Group which are not regulated by RBI or any other financial sector regulator cannot be brought under the NOFHC structure. [para 2 (C) (iii) of the guidelines]

Q.92. Clause 2D(iv) of the Guidelines envisages an increase in voting capital in first 5 years by way of public issue or private placements. Can funds be raised by way of rights issue? +

A. Yes, subject to regulations relating to rights issues. The shareholding of the NOFHC will be a minimum of 40 per cent of the paid up voting equity capital of the bank which shall be locked in for a period of five years from the date of commencement of the business of the bank. The shareholding in excess of 40 per cent of the total paid up voting equity capital should be brought down to 40 per cent within three years from the date of commencement of business of the bank. [para 2 (D) (ii) and (iii) of the guidelines]

Q.93. Are the bank and the NOFHC permitted to have common directors? Can they therefore also have some and/or all common independent directors? Similarly, can the NOFHC have some and/or all common independent directors as other regulated financial services entities held by the NOFHC? +

A. There could be common directors in the NOFHC and the bank. [para 2(G)(i) of the guidelines]. A director of the NOFHC cannot be considered as independent director of the bank. The common directorship between the NOFHC and other regulated financial services entities would be as per the regulations of the sectoral regulators concerned. [para 2 G (iv) of the guidelines]

Q.94. Whether a bank is to be incorporated prior to making an application to the RBI for a licence? Is the bank to be incorporated as a public or private limited company? +

A. No. The bank cannot be incorporated without obtaining ‘in-principle approval’ from the Reserve Bank. The bank will be incorporated as a public limited company.

Q.95. Is the banking company required to be incorporated before submitting the application? If not, how should form III, which seeks details of the date of incorporation etc. be completed ? +

A. No. The bank cannot be incorporated without obtaining ‘in-principle approval’ from the Reserve Bank. In case in-principle approval is given by the Reserve Bank, the bank should be set up within a period of 18 months from the date of in-principle approval. The same may be mentioned in the Form III.

Q.96. For a listed NBFC (which has individual promoter holding more than 10 percent shares in individual capacity), that desires to form a bank - the ownership of listed NBFC needs to be moved to NOFHC as per paragraph 2(C) (iii). This can be achieved by swap of shares in which NOFHC will acquire shares of listed NBFC from the existing shareholders and will in turn issue NOFHC shares to the shareholders. In such a scenario, the limit of 10 percent holding by individual promoter in NOFHC as mentioned in paragraph 2(C) (ii)(a) may not be met on the day one as the shareholding of NOFHC will be the mirror image of that of the listed NBFC. However, since NOFHC will have to bring its holding in the bank to 40 percent within three years, the individual promoter’s holding will be automatically reduced to below 10 percent, although it may be more than 10 percent in NOFHC to begin with. Will there be any dispensation / relaxation for condition of paragraph 2(C)(ii)(a)? Will individual promoters be allowed to divest their holding over a period of time – say 2-3 years to get reduced to 10 percent? +

A. This model is not possible for the following reasons:

(i) The NOFHC should be wholly owned by the Promoters/Promoter Group [para 2(A) of the guidelines].

(ii) If as a result of the share swap, any part of the shareholding of the NOFHC is held by the public, which holds shares in the listed NBFC, then the NOFHC cannot be wholly owned by the Promoters/Promoter Group.

Q.97. The capital structure of the wholly-owned NOFHC set up by Promoter / Promoter Groups in Private Sector shall consist of: a) voting equity shares not exceeding 10 percent of the total voting equity shares of the NOFHC held by any individual belonging to the Promoter Group, along with his relatives (as defined in Section 6 of the Companies Act 1956) and along with entities in which he and / or his relatives hold not less than 50 percent of the voting equity shares, and b) companies forming part of the Promoter Group whereof companies in which the public hold not less than 51 percent of the voting equity shares shall hold not less than 51 percent of the total voting equity shares of the NOFHC.” Our query is: - “How to bring rest 90 percent voting equity shares in NOFHC to make it fully owned” assuming promoters do not have any listed company, in which public is substantially interested? +

A. The requirement is that the NOFHC has to be wholly owned by the Promoters/Promoter Group. Further, at least 51 percent of the voting equity shares of the NOFHC have to be held by companies in the Promoter Group in which public hold not less than 51 percent of the voting equity of those companies. A company in which public holds 51 per cent need not necessarily be listed.[para 2 (C) (i) & (ii) of the guidelines]