BackDeadline to apply for small, payments bank licences extended
Deadline extended to 2 February from 16 January in view of request seeking extension from applicants, says RBI
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Mumbai: The Reserve Bank of India (RBI) has extended the deadline for the submission of applications to open small finance banks and payments banks to 2 February from 16 January, in view of the “request seeking extension" from applicants, the central bank said on its website on Thursday.
RBI also put out clarifications to 320 queries it received from individuals and organizations on the guidelines released on 27 November. The central bank clarified that promoters of large corporate groups with ₹ 1,000 crore in assets and non-financial business, accounting for 40% of total assets or revenues, will not be able to become the promoter of a small bank.
Groups having two non-banking finance companies (NBFCs) will have to fold the operating NBFC into the bank and will only be allowed to continue the non-operative holding company.
“The guidelines indicate that on conversion into a small finance bank, an NBFC/MFI (micro-finance institution) will cease to exist and all its business which a bank can undertake should fold into the bank, and the activities which a bank cannot undertake be divested/disposed of. The other financial and non-financial services activities of the promoters should be kept distinctly ring-fenced and not co-mingled with the bank," RBI said.
Further, an existing co-operative bank cannot convert into a small bank.
Preference will be given to entities which, in the initial phase, set up the bank in a cluster of under-banked states/districts, such as in the North-East, East and Central regions of the country, RBI said.
RBI also clarified that there are no ideal number of branches for a small bank to be eligible for a licence. Also, a non-non resident Indian (NRI), if he or she decides to return for good to the country, can apply for a licence.
Also, all lending activities must be conducted from inside the bank and those that are not permitted by banks but can be done by NBFCs, like promoter financing and loans for purchasing land, have to be wound up within a period of 18 months from the date of in-principle approval.
Small banks will also not be allowed to set up any subsidiaries like housing finance companies and cannot be a business correspondent, but can have their own business correspondent networks.
“At the time of making applications, the promoters/promoter group will have to furnish a plan and methodologies they would adopt to comply with all the requirements of the guidelines within 18 months from the date of in-principle approval or as on the date of commencement of operations, whichever is earlier," RBI said.
The central bank also said that promoters of small banks can exit the entities only once RBI is “comfortable" regulatorily and supervisorily with their running.
New small banks could also have a little under three years to comply with RBI’s priority sector lending (PSL) targets. “For example, if in-principle approval is granted in June 2015, the bank has to commence banking business latest by December 2016. In that case, the bank has to maintain PSL by March 31, 2018 on the ANBC (adjusted net bank credit) base as of 31 March 2017(the reference date). In such a scenario, about 33 months would be available to the promoters/promoter group to achieve the PSL target on the existing loan book carried over to the new bank," RBI said.
Also, loans against borrowings from other banks will not have PSL status once the small banks commence business.
Small banks have been envisaged to provide loans to small businesses and marginal farmers. In guidelines issued in November, RBI also issued norms for payments banks. Both small and payment banks are envisaged to provide basic savings, deposit, payment and remittance services to people who currently do not have a bank account, including millions of migrant workers.
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