RBI’s ontap bank licensing policy will give the NBFCs a chance to convert into banks

The Reserve Bank of India has published draft guidelines for giving continuous licenses for private sector banks. The policy which was adopted couple of years back and announced in the budget is known as ‘ontap’ bank licensing where eligible candidates will be provided license regularly.

As per the guidelines, entities and individuals can apply for bank licenses. Such a license will enable them to start full-fledged universal banks.

Several conditions regarding eligibility of the applicant- separate for individuals and NBFCs, promoter’s shareholding norms, fit and proper criteria etc are elaborated by the RBI.

Regarding capital, the minimum capital required is Rs 5 billion as in the case of existing stipulations. Promoters can hold less than 10 per cent stake. Individual applicants should have a minimum experience of ten years.

There are several NBFCs that applied for license in 2014 when Bandhan and IDFC were given bank license. Now, many NBFCs may think twice before application as there is strict shareholding limitations as well as additional capital requirements under Basel III.

The RBI has stated that the present guidelines are designed in the context of the recent bank licensing initiatives and the differentiated bank license policy experiences.

“Based on the experience of licensing two universal banks in 2014 and that of granting in-principle approvals for Small Finance Banks and Payments Banks, the Reserve Bank has now worked out a new framework for granting licences for universal banks on a continuous basis.” – the draft has added about the guidelines.

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Tags : ontap bank license policy by the rbi