Spotlight on RBI

New Year, 2013 holds a lot of promise. And the first big expectation is from the banking sector.  In the first month of the new year, RBI is scheduled to release final guidelines for new bank licensing norm, allowing entry to a third set of private banks. This has taken more than three years but looking at the way most things works, this is more like a ‘fast track.’

And what would be the new guidelines? Well, as per the guidelines issued in August 2011, RBI had stated that promoters/promoter groups with diversified ownership, sound credentials and integrity that have a successful track record for at least 10 years in running their businesses shall be eligible to promote bank entity. It had stated that a group undertaking real estate or capital market activities, mainly broking, on a significant scale should not be considered for a bank licence. Minimum capital requirement was stipulated at Rs.500 crore. The bank can be set up only through a wholly owned Non-Operative Holding Company (NOHC) which will hold minimum 40% of the paid-up capital of the bank with a lock in of 5 years. And when the shareholding in NOHC exceeds 40%, it has to be brought down to 20% within 10 years and to 15% within 12 years. FDI cannot exceed 49% for the first 5 years. And it states that existing NBFCs will be permitted to either promote a new bank or convert themselves into banks.

And then the applications will start. Who could be in the race?  First and right ahead is L&T Finance, followed by Bajaj Finserv, Mahindra and Mahindra Finance, IFCI, Shriram Capital, Reliance Capital, are the immediate big names which could get invited.

2013 is thus beginning with RBI expected to steal all the limelight – new banking license and interest rate cuts. Let’s see which way this wind blows…