RBI to offer banking license to corporates - Views on News from Equitymaster

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RBI to offer banking license to corporates

Jun 15, 1999

The Reserve Bank of India in a surprising about-turn from its earlier stand has shown a willingness to grant banking licenses to corporate houses. The promoters, will however, have to bring in Rs 3 bn as capital to obtain fresh licenses, as against the Rs 1 bn limit specified earlier. The internal committee set up by RBI to review the new private bank guidelines has made the suggestions. Sources said that the final draft of the guidelines was ready for approval. The earlier stand of RBI of not granting banking licenses to private corporates was prompted by fears that the corporates, apart from not having any banking experience in financial services, might engage in inter-group dealings.

The limit on capital has been maintained on the higher side to ensure that financially strong corporates apply for licenses. However, some sources said that in view of the practical cash flow constraints, the Rs 3 bn be brought in instalments ranging from 1-3 years. Other highlights include limiting the foreign investment to 40% and conditions to dilute promoter's holding to 40% within 3 years.

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