Budget 2020

​RBI panel in favour of letting well-run large NBFCs convert into banks

NEW DELHI: A panel set up by the Reserve Bank of India (RBI) in June on Friday recommended that well-run large non-banking finance companies (NBFCs), with an asset size of Rs 50,000 crore and above, may be considered for conversion into banks. This is subject to the completion of 10 years of operations and meeting due diligence criteria.

In another update, the panel also suggested raising the cap on the stake of private bank promoters to 26 per cent from the current 15 per cent in the long run (15 years).

“As regards non-promoter shareholding, a uniform cap of 15 per cent of the paid-up voting equity share capital of the bank may be prescribed for all types of shareholders,” the RBI’s Internal Working Group recommended.

It further added that large corporate or industrial houses may be allowed as promoters of banks only after necessary amendments to the Banking Regulation Act, 1949.

The panel also said that the minimum initial capital requirement for licensing new banks should be enhanced from Rs 500 crore to Rs 1,000 crore for universal banks and from Rs 200 crore to Rs 300 crore for small finance banks.

“For payments banks intending to convert to a small finance bank, a track record of 3 years of experience as payments bank may be considered as sufficient. Small finance banks and payments banks may be listed within 6 years from the date of reaching net worth equivalent to prevalent entry capital requirement prescribed for universal banks’ or 10 years from the date of commencement of operations, whichever is earlier,” RBI said in a release.