The Reserve Bank of India (RBI) released draft guidelines for on-tap licensing of universal banks in the private sector, allowing individuals with 10 years of experience in banking and finance to apply for a licence.

New Guidelines
Eligible promoters
Existing NBFCs that are ‘controlled by residents’ and have a successful track record for at least 10 years. Individuals or professionals who are ‘residents’ and have 10 years of experience in banking and finance. Entities in the private sector that are ‘owned and controlled by residents’ and have a successful track record for at least 10 years, provided that if such entity has total assets of R 5,000 crore or more, the non-financial business of the group does not account for 40% or more in terms of total assets in terms of gross income
Minimum capital requirement
The initial minimum paid-up voting equity capital for a bank shall be R500 crore. Thereafter, the bank shall have a minimum net worth of R500 crore at all times.
The promoters and the promoter group/NOFHC shall hold a minimum of 40% of the paid-up voting equity capital of the bank which shall be locked-in for a period of five years from the date of commencement of business of the bank. The promoter group shareholding shall be brought down to 15% within a period of 12 years from the date of commencement of business of the bank.
Foreign shareholding in the bank
The foreign shareholding in the bank would be as per the existing foreign direct investment (FDI) policy subject to the minimum promoter shareholding requirement.
Listing requirement
The bank shall get its shares listed on the stock exchanges within six years of the commencement of business by the bank. The bank shall open at least 25% of its branches in unbanked rural centres (population up to 9,999 as per the latest census).
According to the guidelines, an applicant who has not been found suitable for issue of licence will not be eligible to make an application for banking licence for a period of three years from the date of that decision.
Universal banking is a banking system in which banks provide a wide variety of financial services, including both commercial and investment services. While a universal banking system allows banks to offer a multitude of services, it does not require them to do so. Banks in a universal system may still choose to specialize in a subset of banking services.
The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.

Basic functions of the Reserve Bank as:
“…to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.”
Monetary Authority:
• Formulates, implements and monitors the monetary policy.
• Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.
Regulator and supervisor of the financial system:
• Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
• Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.
Manager of Foreign Exchange
• Manages the Foreign Exchange Management Act, 1999.
• Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
Issuer of currency:
• Issues and exchanges or destroys currency and coins not fit for circulation.
• Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.
Developmental role
• Performs a wide range of promotional functions to support national objectives.
Related Functions
• Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
• Banker to banks: maintains banking accounts of all scheduled banks.
The inaugural governor of R.B.I was the Britisher Sir Osborne Smith, while C. D. Deshmukh was the first Indian governor. Dr. Raghuram Rajan is currently serving as the 23rd governor of R.B.I.


Leave a Comment


Welcome! Login in to your account

Remember me Lost your password?

Lost Password