Microfinance Focus, August 29, 2011: The Reserve bank of India (RBI) has today released ‘Draft Guidelines for Licensing of New Banks in Private Sector’ which says that existing NBFCs, if considered eligible, may be permitted to either promote a new bank or convert themselves into banks.

RBI wants the new banks to open at least 25 per cent of their branches in unbanked rural centres (population upto 9,999 as per 2001 census).

The guidelines require new banks to be set up only through a wholly owned Non-Operative Holding Company (NOHC) to be registered with the RBI as a non-banking finance company (NBFC) which will hold the bank as well as all the other financial companies in the promoter group.

One of the mandates say that the exposure of bank to any entity in the promoter group shall not exceed 10 per cent and the aggregate exposure to all the entities in the group shall not exceed 20 per cent of the paid-up capital and reserves of the bank.

At least 50 per cent of the directors of the NOHC should be independent directors and the bank shall get its shares listed on the stock exchanges within two years of licensing, it says.

The guidelines have also barred entities from entering the banking sphere which have 10 per cent or more income or assets or both from real estate construction and / or broking activities individually or taken together in the last three years.

The Reserve Bank has sought views/comments on the draft guidelines from banks, non-banking financial institutions, industrial houses, other institutions and the public at large. Final guidelines will be issued after receiving feedbacks and amendments to Banking Regulation Act, 1949