Field to be levelled for all on PSL, rural branch norms: RBI
Mumbai: The Reserve Bank Monday sought to allay apprehensions over the lack of level-playing field on issues like rural branch presence and foreign holdings between the existing lenders and the new ones who are to be granted licences.
Replying to a specific query on the lack of level-playing due to the insistence on having 25 percent presence in rural areas, the RBI said all the incremental branches by the existing players are opened in the same proportion.
"With a view to enhancing financial inclusion, the conditions relating to the branch network are specifically prescribed at 25 percent for unbanked rural centres...This norm has been extended to the existing banks also and they are required to comply with this stipulation while opening new branches," the regulator said.
A senior official from a NBFC interested in entering the fray sounded unhappy and called for some way of a regulatory forbearance in the aspect. He said only 8 percent of the branches at present are in rural areas while RBI expects newer players to have it at 25 percent from day one.
"The existing lenders will find it easy to subsidise their rural branches with the large number of branches they have in the lucrative urban centres while the new entrants will have to find ways of dealing with the problem," the official said.
To a query on ceiling of 49 percent equity for the first five years on foreign holding, RBI said it has been done to encourage more domestic investors getting in.
"After expiry of five years, the aggregate foreign shareholding in the bank would be allowed as per the extant FDI policy," RBI said in the over 160-pages clarifications it issued today, answering 443 questions from 39 entities.
The central bank also clarified that the new banks will have to abide by the existing requirements on the cash reserve ratio or the ratio deposits to be parked with RBI, the government bond holding or statutory liquidity ratio and the priority sector lending requirements, which have been kept at par with an existing lender.
There will no regulatory forbearance in any of the matters, it said.
It said non-bank lenders (NBFCs) can convert their presence in tier-II to tier-VI cities into bank branches once they are selected to enter the fray.
However, for lucrative tier-I cities, the Reserve Bank said, the conversion can be done, but would be deducted from the particular applicant NBFCs (non bank finance company) quota of tier-I branches.
"All NBFC branches in Tier 1 centres which would carry out banking business may be permitted to be converted into bank branches and the excess over the entitled number of Tier 1 branches would be adjusted against the future entitlements of the new bank within a maximum three years from the date of commencement of business by the bank," it said.
RBI added that the branches of NBFCs and the bank should be "distinct and separate".
Additionally, once a NBFC branch is converted into a bank branch, it cannot conduct business of the NBFC, it added.
The Reserve Bank explained that the new entrants have been disallowed getting into newer areas for three years because it wants them to get on "sound footing" before diversification.