Insurance Sector In India Essay

328 words - 2 pages

After a span of 10 years RBI is set to issue fresh banking license. In 2003 -04 it had last issued license to Yes bank and Kotak Mahindra bank . The RBI issued the final guidelines for license of new private banks wherein entities both from private and public sector shall be eligible to set up a bank through a wholly owned non operative financial holding company (NOFHC).
The NOFHC shall be wholly owned by promoter/promoter ...view middle of the document...

Entities /groups should have past record of sound credentials and integrity be financially sound and successful track record of 10 years .

Criteria for applying license
A business group which keen for applying for license should have a minimum paid up capital of Rs 500 crore. At the start of the banking operation, NOFHC should hold a minimum of 40% of equity for lock in period of 5 years .later it has to be brought down to 15% within 12 year from that onwards.
The NOFHC will be registered as Non - banking finance company with RBI while the bank will be governed by the prudential regulations by RBI.
NOFHC and bank shall not have any exposure to the promoter group. The bank shall not invest in the equity /debt capital instrument of any financial entities held by the NOFHC.
However RBI put a stricter condition of having 25% of its branches in unbanked rural area. with population upto 9999 . New banks should achieve priority sector lending target of 40%.
Foreign share holding in the new bank does not exceed 49% for the first five years after which it can be extended as per policy norms.
In India 60% of population is away from banking services, the steps to give more license to private sector banks, will become a mile stone for financial inclusion, financial literacy and Poverty eradication .

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