Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Clarifications on queries relating to regulatory forbearance and transition issues (360-422)

a) CRR and SLR requirements

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

No forbearance for maintenance of CRR and SLR will be granted by RBI, as these are statutory requirement for the banks.

b) Priority Sector Lending (PSL)

As per the current guidelines, the PSL targets (40 per cent of adjusted net bank credit) for the current year (April-March) are computed based on the adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (OBSE) of 31st March of the preceding year (April-March), whichever is higher, and the achievements under the targets are reckoned on the position as on 31st of the succeeding year.

The new banks have to comply with the PSL requirements- targets and sub-targets. For the new banks converted from NBFCs and for new banks that would acquire the loan book from the Group entities (NBFCs), the PSL targets and sub-targets and achievements thereunder would be counted on the entire portfolio after the commencement of business as per the existing instructions. The newly set up banks will have time from the date of grant of in-principle approval to achieve the PSL target.  The amount of time would depend upon the date of commencement of their banking business.

For example, if ‘in-principle’ approval is granted in February 2014, the bank has to commence banking business latest by August, 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 37 months would be available to the Promoters/Promoter Groups to achieve the PSL target.  In an alternate scenario, if ‘in-principle’ approval for setting up of a bank is granted sometime in April, 2014, the bank has to commence banking business latest by October 2015.  If the bank commences banking business by October 2015, the ANBC base for computation of PSL targets gets shifted to March 31, 2016 (the reference date), and the bank has to achieve the targets by March 31, 2017 ( i.e. 35 months from the date of issue of ‘in-principle’ approval).  In a third scenario, if ‘in-principle’ approval is granted in June 2014, the bank has to commence banking business latest by December 2015. In that case, the bank has to maintain PSL by March 31, 2017 on the ANBC base as of March 31, 2016 (the reference date). In such a scenario about 33 months would be available to the Promoters/Promoter Groups to achieve the PSL target on the existing loan book carried over to the new banks.

c) Prudential/Exposure Norms

No regulatory forbearance would be granted to the new banks in respect of prudential/ exposure norms.

d) Branch Authorization Norms

The guidelines [para 2(L)] lay down the requirement very clearly.

The conversion of existing NBFC branches into bank branches would be automatically permitted for Tier 2 to 6 centres. The number of ultra small branches (USB) and number of branches in Tier 2 to 6 centres, would be as per the business plans of the Promoters/Promoter Group and requirement of the new bank. In the case of Tier 1 centres, conversion would only be allowed with the specific prior approval of the RBI and subject to the existing rules/ methodology applicable to domestic banks regarding opening of branches in these centres, and also subject to maintaining a minimum 25 per cent of the bank branches in unbanked rural centres (population up to 9,999 as per the latest census) required of all banks as specified in 2(K) of the guidelines. For this purpose, RBI would issue a letter of authorization under Section 23 of the Banking Regulation Act, 1949.

In cases of excess NBFC branches in Tier 1 centres, all such branches which would carry out banking business may, with prior RBI approval, be converted into bank branches. The excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum period of 3 years from the date of commencement of business by the bank. The remaining Tier 1 branches will have to be closed down at the end of three years. The Promoters/Promoter Group have to provide a roadmap in this regard.

e) FDI in the new banks

e) FDI in the new banks

As transfer of assets and liabilities would be a part of the re-organization of the business of the group entities to comply with the provision of our guidelines, more particularly to comply with the NOFHC structure, the new bank would be permitted to grandfather such liabilities till maturity, subject to the following conditions:

1. The ECB/FCCB liabilities for the purpose of transfer to the new bank should be frozen as on the date of in-principle approval for setting up a new bank;

2. The liabilities under ECB/FCCB that would be transferred to the new bank together with other forex borrowing should not exceed 50 per cent of its Tier I capital;

3. In case these borrowings exceed the limit of 50 per cent of Tier I capital due to grandfathering of ECB/FCCB, no further borrowing would be permitted till the aggregate borrowings are brought within the regulatory limit.

4. In order to protect the interests of the depositors of the new bank, while allowing grandfathering of term borrowings and other secured liabilities taken over from NBFCs, RBI will impose additional capital charge on the new bank, where it would allow creation/ continuation of floating charges on the assets of the new bank.

g) Capital adequacy for the NOFHC

RBI would not provide any time window to comply with the capital requirement at the consolidated level. No regulatory forbearance would be granted in this regard.

h) Tax issues

The matter falls outside the purview of RBI. The tax laws as prescribed by the tax authorities would have to be adhered to.

i) Delay in grant of approvals

In genuine cases of delay in granting approval by regulators / Government, RBI may consider granting extension of time for operationalising the bank.

j) Reorganization of business and transfer of assets and liabilities to the new banks

The receipt of applications for the new bank licence will close on July 1, 2013. At the time of making applications, the Promoters/Promoter Groups will have to furnish a road map and methodologies they would adopt to comply with all the requirements of the corporate structure indicated in para 2 (C)(ii) and (iii) of the guidelines and realign the business between the entities to be held under the NOFHC (para 2(C)(iv) within a period of 18 months. After the ‘in-principle approval’ is accorded by RBI for setting up of a bank, the proposed bank has to start operations within this period. The actual setting up of NOFHC and the bank, re-organization of the Promoter Group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed during this period. The Promoters/Promoter Group would be issued the banking licence under Section 22 of the Banking Regulation Act, 1949 for carrying out of banking business by the Reserve Bank of India upon compliance with the terms and conditions stipulated in the ‘in-principle approval’ for setting up of a bank and on completion of the process as mentioned above within the stipulated time frame of 18 months from the date of in-principle approval. 

f) Transfer of ECB and term borrowings/bonds from other entities to banks

Ans : Based on the geographical location of branches covered, there are three broad categories of ECS Schemes – Local ECS, Regional ECS and National ECS.These schemes are either operated by RBI or by the designated commercial banks. NACH is also one of the form of ECS system operated by NPCI and further details about NACH is available at NPCI web site under the link http://www.npci.org.in/clearing_faq.aspx.

Local ECS – this is operating at 81 centres / locations across the country. At each of these ECS centres, the branch coverage is restricted to the geographical coverage of the clearing house, generally covering one city and/or satellite towns and suburbs adjoining the city.

Regional ECS – this is operating at 9 centres / locations at various parts of the country. RECS facilitates the coverage all core-banking-enabled branches in a State or group of States and can be used by institutions desirous of reaching beneficiaries within the State / group of States. The system takes advantage of the core banking system in banks. Accordingly, even though the inter-bank settlement takes place centrally at one location in the State, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the State / group of States.

National ECS – this is the centralized version of ECS Credit which was launched in October 2008. The Scheme is operated at Mumbai and facilitates the coverage of all core-banking enabled branches located anywhere in the country. This system too takes advantage of the core banking system in banks. Accordingly, even though the inter-bank settlement takes place centrally at one location at Mumbai, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the country. Banks are free to add any of their core-banking-enabled branches in NECS irrespective of their location. Details of NECS Scheme are available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2345

The list of centres where the ECS facility is available has been placed on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=26. Similarly, the centre-wise list of bank branches participating at each location is available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/ECSUserView.aspx?Id=27

ECS (CREDIT)

Ans : The User intending to effect payments through ECS Credit has to submit details of the beneficiaries (like name, bank / branch / account number of the beneficiary, MICR code of the destination bank branch, etc.), date on which credit is to be afforded to the beneficiaries, etc., in a specified format (called the input file) through its sponsor bank to one of the ECS Centres where it is registered as a User.

The bank managing the ECS Centre then debits the account of the sponsor bank on the scheduled settlement day and credits the accounts of the destination banks, for onward credit to the accounts of the ultimate beneficiaries with the destination bank branches.

Further details about the ECS Credit scheme are contained in the Procedural Guidelines and available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=1

Ans : ECS Credit payments can be initiated by any institution (called ECS Credit User) which needs to make bulk or repetitive payments to a number of beneficiaries. The institutional User has to first register with an ECS Centre. The User has to also obtain the consent of beneficiaries (i.e., the recipients of salary, pension, dividend, interest etc.) and get their bank account particulars prior to participation in the ECS Credit scheme.

ECS Credit payments can be put through by the ECS User only through his / her bank (known as the Sponsor bank). ECS Credits are afforded to the beneficiary account holders (known as destination account holders) through the beneficiary account holders’ bank (known as the destination bank). The beneficiary account holders are required to give mandates to the user institutions to enable them to afford credit to their bank accounts through the ECS Credit mechanism.

Ans : Primarily, there are two variants of ECS - ECS Credit and ECS Debit.

ECS Credit is used by an institution for affording credit to a large number of beneficiaries (for instance, employees, investors etc.) having accounts with bank branches at various locations within the jurisdiction of a ECS Centre by raising a single debit to the bank account of the user institution. ECS Credit enables payment of amounts towards distribution of dividend, interest, salary, pension, etc., of the user institution.

ECS Debit is used by an institution for raising debits to a large number of accounts (for instance, consumers of utility services, borrowers, investors in mutual funds etc.) maintained with bank branches at various locations within the jurisdiction of a ECS Centre for single credit to the bank account of the user institution. ECS Debit is useful for payment of telephone / electricity / water bills, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc., that are periodic or repetitive in nature and payable to the user institution by large number of customers etc.

Ans : ECS is an electronic mode of payment / receipt for transactions that are repetitive and periodic in nature. ECS is used by institutions for making bulk payment of amounts towards distribution of dividend, interest, salary, pension, etc., or for bulk collection of amounts towards telephone / electricity / water dues, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc. Essentially, ECS facilitates bulk transfer of monies from one bank account to many bank accounts or vice versa. ECS includes transactions processed under National Automated Clearing House (NACH) operated by National Payments Corporation of India (NPCI).