RBI Working Group Suggests Converting NBFCs Into Banks, Other Sweeping Changes

21 Novembre, 2020, 10:08 | Auteur: Auguste Feret
  • RBI Working Group Suggests Converting NBFCs Into Banks Other Sweeping Changes

The recommendations, bankers said, could usher in a fresh wave of consolidation in the sector, where several lenders are struggling to meet minimum capital norms because of a surge in bad loans.

The panel also recommended that for Payments Banks intending to convert to a Small Finance Bank (SFB), their track record of three years should be considered sufficient and 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.

The cap on promoters' stake in private banks has been proposed to be raised to 26 per cent from 15 per cent over a period of 15 years.

An Internal Working Group (IWG) constituted by RBI today suggested that the cap on promoters' stake in private banks may be raised from the current 15 per cent to 26 per cent of paid-up voting equity share capital in the long run.

The panel has also said the voting rights of any single non-promoter be limited to 15 per cent of the voting equity capital.

The move has a direct implication on promoter holding of Kotak Mahindra Bank and IndusInd Bank, where promoter holding has been a contentious issue. However, it should be mandatory only in cases where the individual promoters, promoting entities or converting entities have other group entities, the panel added.

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It said non-operative financial holding company (NOFHC) should continue to be the preferred structure for all new licenses to be issued for universal banks.

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. Thereafter it has to be brought down to 30 per cent within 10 years and 15 per cent within 15 years.

"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.

The panel also suggested capping of banks' investment in any new or existing entity to 20%.

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. "If new rules are tougher, legacy banks should also confirm to new tighter regulations, but transition path may be finalized in consultation with affected banks", the report said.

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.

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