KAUN BANEGA BANKER?

Who will get the new banking license?

That’s probably the only non-Covid related question doing the rounds in India Inc currently. RBI, on 15^th April, released names of eight candidates who had applied for this round of  ‘on tap’ Licensing of Universal Banks and Small Finance Banks. And it was pretty astonishing to see that not a single big corporate house had applied this time around; infact not many of the names most of us are very familiar with. Take a look at them:

Applicants under Guidelines for ‘on tap’ Licensing of Universal Banks

1. UAE Exchange and Financial Services
2. The Repatriates Cooperative Finance and Development Bank Limited (REPCO Bank)
3. Chaitanya India Fin Credit Private Ltd
4. Mr.Pankaj Vaish and others

The guidelines

1. resident individuals and professionals having 10 years of experience in banking and finance at a senior level are also eligible to promote universal banks;
2. large industrial houses are excluded as eligible entities but are permitted to invest in the banks up to 10%;
3. Non-Operative Financial Holding Company (NOFHC) has been made non-mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities;
4. Not less than 51% of the total paid-up equity capital of the NOFHC shall be owned by the promoter/promoter group, instead being wholly owned by the promoter group; and
5. Existing specialised activities have been permitted to be continued from a separate entity proposed to be held under the NOFHC subject to prior approval from the Reserve Bank and subject to it being ensured that similar activities are not conducted through the bank as well.
6. Groups or companies applying for such licences must have assets of Rs 5,000 crore or above and the non-financial businesses do not account for 40% or more of these assets.

In 2014, out of 26 aspirants, only two received a license for universal banking – Bandhan Bank and IDFC Bank, which is now merged with Capital First and renamed as IDFC First Bank.

Applicants under Guidelines for ‘on tap’ Licensing of Small Finance Banks

1. VSoft Technologies Private Ltd
2. Calicut City Service Co-operative Bank
3. Mr.Akhil Kumar Gupta
4. Dvara Kshetriya Gramin Financial Services Private Ltd

Guidelines:

1. The licensing window will be open on-tap
2. Individuals must have at least 10 years of experience in the banking and finance sector at senior levels.
3. Groups, companies, existing payments banks, non-banking finance companies, microfinance companies, local area banks and cooperative banks applying for these licenses must have at least five years of successful track record.
4. Minimum paid-up voting equity capital / net worth requirement shall be Rs.200 crore
5. For Primary (Urban) Co-operative Banks (UCBs), desirous of voluntarily transiting into Small Finance Banks (SFBs) initial requirement of net worth shall be at Rs.100 crore, which will have to be increased to Rs.200 crore within five years from the date of commencement of business. Incidentally, the net-worth of all SFBs currently in operation is in excess of Rs.200 crore
6. SFBs will be given scheduled bank status immediately upon commencement of operations
7. SFBs will have general permission to open banking outlets from the date of commencement of operations
8. Payments Banks can apply for conversion into SFB after five years of operations, if they are otherwise eligible as per these guidelines.

This time around, it’s the individuals who are very interesting and given their experience, might make it too. There is Flipkart co-founder, Sanjay Bansal’s micro finance company, Chaitanya India; Pankaj Vaish is an ex-Citibank MD and is currently the Chief Investment Officer at PV Capital Management. And it will be really interesting to see how Pankaj Gupta, the vice chairman at Bharti Enterprises Sources, who has applied for the license in his personal capacity will get treated by the RBI.

Let us now wait and see how and whose names RBI announces in the next couple of weeks. At a time when existing banks are having a tough time and PSU banks are being merged and plans afoot to be privatized, new banking licenses seems, well, like an irony.