Reserve Bank of India releases new banking guidelines

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On 22 February the Reserve Bank of India (RBI) released the Guidelines for Licensing of New Banks in the Private Sector, paving the way for new private sector banks to obtain licences. The guidelines outline the conditions that aspiring banks must fulfil to qualify for a licence. These relate to the eligibility and background of promoters, corporate structure, shareholding norms, governance and prudential and exposure norms.

Eligible promoters

Private sector entities which are “owned and controlled by residents” and entities in the public sector are eligible to promote a bank through a wholly owned non-operative financial holding company (NOFHC). Promoters and promoter groups with an existing non-banking financial company (NBFC) can apply for a bank licence but will require RBI approval to promote a bank.

Credentials

The RBI will assess the promoters/promoter groups on the following “fit and proper” criteria when granting a banking licence:

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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.