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Capital needed for banking licence may be doubled if RBI accepts recommendations
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SME Times News Bureau | 21 Nov, 2020
To ensure that entities seeking private banks licence remained
adequately capitalised to meet any eventuality, a Reserve Bank of India
internal committee has recommended nearly doubling of the initial
capital and net worth requirements to be eligible for getting a banking
licence.
The P.K. Mohanty headed working committee had
recommended that the minimum initial capital requirement to set up a new
universal bank may be increased to Rs 1000 crore while that of small
finance bank (SFB) may also be raised to Rs 300 crore.
Under the
on-tap licence being given by the RBI for these categories, the current
initial capital requirement for a universal bank is Rs 500 crore and
that of SFB is Rs 200 crore.
The committee has also recommended
raising the initial paid up voting equity share capital for unban
cooperative banks (UCBs) transiting to SFBs from the present Rs 100
crore to Rs 150 crore, which it has said has to be increased to Rs 300
crore in five years.
"As the licensing guidelines are now on
continuing basis (on-tap), the Reserve Bank may put a system to review
the initial paid up voting equity share capital/net worth requirement
for each category of banks, once in five years," the committee said in
its report that was released by the RBI on Friday evening.
The
committee has also recommended listing of SFBs within six years from the
date of reaching net worth equivalent to prevalent entry capital
requirement prescribed for universal banks' or 'ten years from the date
of commencement of operations', whichever is earlier.
It has
said that for existing small finance banks and payments banks, listing
should be done 'within six years from the date of reaching net worth of
Rs 500 crore' or 'ten years from the date of commencement of
operations', whichever is earlier.
Universal banks will have to
be listed within six years of commencement of operations as is the case
now, the committee has said.
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