The Reserve Bank of India (RBI) has received four applications each for on-tap universal private bank licenses and small finance bank (SFB) licenses.
The list includes a foreign exchange services provider, two cooperative banks and a former banker. Unimoni Financial Services, erstwhile UAE Exchange and Financial Service, is again trying its luck this year after being denied license in 2017.
The four entities which have submitted applications for on-tap universal bank licenses include, UAE Exchange and Financial Services, which has now changed its name to Unimoni Financial Services, The Repatriates Cooperative Finance and Development Bank (REPCO Bank), Chaitanya India Fin Credit and Pankaj Vaish and others.
Those which have shown interest in setting up small finance banks are VSoft Technologies, Calicut City Service Cooperative Bank, Akhil Kumar Gupta and Dvara Kshetriya Gramin Financial Services.
The RBI had last handed out universal bank licenses in 2014 when it gave its in-principle approval to IDFC and Bandhan Bank. IDFC Bank has since merged with Capital First Ltd to form IDFC First Bank while Bandhan has acquired Gruh Finance (NBFC).
UAE Exchange had applied unsuccessfully for a banking license in 2017.
In 2018, the RBI issued licenses to 10 SFBs, including Janalakshmi Financial Services, Ujjivan Financial Services based in Bengaluru, RGVN (North East) Microfinance based in Guwahati among others.
A few weeks ago, the RBI had set up a five-member standing external advisory panel, led by former deputy governor Shyamala Gopinath, to evaluate and review applications for universal and SFBs. SFBs are mandated to focus on priority sector lending and small loans.
According to the guidelines for on-tap licensing for universal banks released by the RBI in August 2016, eligible entities seeking universal bank licences must be individuals or entities with at least 10 years of experience in banking and finance at a senior level or private companies or groups with at least 10 years of successful track record.
Groups or companies applying for such licences must have assets of Rs5,000 crore or above and the non-financial businesses do not account for 40% or more of these assets.
Existing non-banking financial companies (NBFCs) controlled by residents and with a successful track record for at least 10 years were also allowed to apply for licenses. To be eligible to apply for a small finance bank licence, individuals must have at least 10 years of experience in the banking and finance sector at senior levels. Groups, companies, existing payments banks, non-banking finance companies, microfinance companies, local area banks and cooperative banks applying for these licenses must have at least five years of successful track record.
Large industrial houses are excluded as eligible entities but are permitted to invest in the banks up to 10%. Non-operative financial holding company (NOFHC) has been made non-mandatory in case of promoters being individuals or standalone promoting or converting entities that do not have other group entities.
In August 2013, RBI released a policy discussion paper on banking structure in India that encouraged an on-tap licensing policy in order to increase competition and bring in new ideas into the system.
For SFBs, the minimum paid-up voting equity capital or net worth requirement shall be Rs200 crore. For primary (urban) co-operative banks (UCBs) desirous of voluntarily transiting into SFBs, the initial net worth requirement shall be at Rs100 crore, which will have to be increased to Rs200 crore within five years from the date of commencement of business. The net worth of all SFBs currently in operation is in excess of Rs200 crore.
