Large industrial houses are unlikely to get the permission to set up a bank given the conditions set by the Reserve Bank of India (RBI).
On Monday, the banking regulator had announced a five-member Standing External Advisory Committee (SEAC) that will evaluate on-tap applications of both universal banks and small finance banks. It will be chaired by Shyamala Gopinath, former deputy governor, RBI.
The RBI had last given permits for full-service banks in 2014. Industrial houses such as the Aditya Birla group, L&T Finance and Tata Sons had submitted applications. However, the central bank selected Bandhan Bank and IDFC.
Subsequently, in 2016 it came out with the guidelines for on tap licensing of universal banks in the private sector. However, only one NBFC — UAE Exchange and Financial Services Ltd, now renamed as Unimoni, applied for a license.
A glance at the conditions set by the RBI shows it excludes large industrial houses with diversified lines of business.
On promoters who could qualify for an on-tap universal banking license, the central bank has said that entities or groups in the private sector that are ‘‘owned and controlled by residents’’ and have a successful track record for at least 10 years can apply.
However, if such an entity or group has total assets of Rs 5,000 crore or more, the non-financial business should not account for 40 per cent or more in terms of total assets or in terms of gross income.
It added that existing non-banking financial companies (NBFCs) that are “controlled by residents’’ and have a successful track record for at least 10 years can also apply. However, any NBFC, which is a part of the group that has total assets of Rs 5,000 crore or more and that the non-financial business of the group accounts for 40 per cent or more in terms of total assets or in terms of gross income, is not eligible.
Last year, an RBI panel has proposed that large corporates may be permitted to promote banks after necessary amendments to the Banking Regulations Act.
The group recommended that "large corporate/industrial houses may be permitted to promote banks only after necessary amendments to the Banking Regulations Act, 1949 to deal with connected lending and exposures between the banks and other financial and non-financial group entities”. Recommendations of the group are yet to be accepted by the RBI.