The Reserve Bank of India (RBI) has released a discussion paper on “Entry of New Banks in the Private Sector”, which paves the way for granting new banking licences. The discussion paper compares India’s position with international experience and then suggests possible approaches (listing both pros and cons) for the way forward. This analysis has been carried out along the following:
1. Minimum capital requirements for new banks and promoters contribution
2. Minimum and maximum caps on promoter shareholding and other shareholders
3. Foreign shareholding in the new banks
4. Whether industrial and business houses could be allowed to promote banks
5. Should Non-Banking Financial Companies be allowed conversion into banks or to promote a bank
6. Business model for the new banks.
This report in The Mint summarizes the key aspects of the discussion paper. RBI has sought comments on the discussion paper by September 30, 2010.
To me, the below point is the most important one.
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To contain the possibility of “holding out” if an industrial / business house comes under severe stress, industrial and business houses may not be allowed to use the brand name and logo of the Group.
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