It recommended that while the current rules relating to promoters' shareholding in the bank being at least 40 per cent in the initial five years of operations of a new bank should stay, the cap on promoters' stake in the long run (15 years) be raised from the current 15 per cent to 26 per cent of the paid-up voting equity share capital of the bank.
The recommendations also included provisions for payments banks intending to convert to small finance banks.
It also called for strengthening of the supervisory mechanism for large conglomerates, including "consolidated supervision" which means that the RBI could supervise other entities in a group as well to ensure that banking norms are not violated.
An internal working group of the Reserve Bank of India (RBI) has proposed the entry of corporate houses into banking and higher promoter stakes in the long run.
IWG suggested doubling the minimum initial capital requirement for licensing new banks from Rs 500 crore to Rs 1,000 crore for universal banks and raising it from Rs 200 crore to Rs 300 crore for small finance banks.
The panel has also suggested that large non-bank lenders with asset sizes of more than ₹50,000 crore, including those owned by corporates, should be considered for conversion into banks, provided they have completed 10 years of operation.
The panel also suggested that a non-operative financial holding company (NOFHC) structure should continue as the preferred route for all new banking licences.
The panel, headed by RBI executive director P.K. Mohanty, was set up in June to review ownership guidelines and corporate structure for Indian private sector banks.
"While banks licensed before 2013 may move to an NOFHC structure at their discretion, once the NOFHC structure attains a tax-neutral status, all banks licensed before 2013 shall move to the NOFHC structure within 5 years from announcement of tax-neutrality", the panel has said.
Till the NOFHC structure is made feasible and operational, concerns with regard to banks undertaking different activities through subsidiaries, joint venture and associates need to be addressed through suitable regulations, the panel suggested. It added that banks now under the NOFHC structure may be allowed to exit from such a structure if they do not have other group entities in their fold.
To discuss the recommendations, Latha Venkatesh and Shereen Bhan spoke to Sachin Chaturvedi, member of RBI Internal Group; Bahram Vakil, founder & senior partner at AZB & Partners; Abizer Diwanji, partner at EY India; PN Vasudevan, MD & CEO of Equitas Bank; SC Garg, former finance secretary; DK Mittal, former financial services secretary; HR Khan, former deputy governor of RBI and Rajnish Kumar, former chairman of State Bank of India. The RBI said it would examine the comments and suggestions before taking a view in the matter. Fit and proper criterion needs to be fool proof.
Mr. Gupta said each year the banking industry has seen more NPAs and frauds so there are compelling reasons to overcome this hurdle.