The Reserve Bank Monday said new bank promoters can hold only up to 49 percent in the proposed non-operative financial holding company (NOFHC) under any format and that individuals cannot form a group to set up the bank holding company.
Mumbai: The Reserve Bank Monday said new bank promoters can hold only up to 49 percent in the proposed non-operative financial holding company (NOFHC) under any format and that individuals cannot form a group to set up the bank holding company.
It also said that separate guidelines pertaining to the NOHFCs will be issued shortly since they will be governed by a separate set of directions.
"If any individual belonging to the promoter group chooses to become a promoter of the NOFHC, he along with his relatives and along with entities in which he and/or his relatives hold not less than 50 percent of the voting equity shares can hold voting equity shares not exceeding 10 percent of the total voting equity shares of the NOFHC.
"Independent individuals forming a group cannot satisfy the above criteria laid down for holding the NOFHC.
Additionally, such newly-formed promoter group would not beable to meet one of the 'fit and proper' criteria, which requires promoters to have a successful track record of running their business for at least 10 years," RBI said in its elaborate clarifications issued today.
"Under all circumstances at least 51 percent of the voting equity shares of the NOFHC shall be held by companies in the promoter group, in which public shareholding is not less than 51 percent," it further said, adding non-voting capital will not be reckoned for the purpose of calculation of promoter shareholding in the NOFHC/bank."
Incidentally, out of the 443 questions the RBI had received from 39 entities, as many as 343 were on the structure and capital holding of the proposed NOHFCs.
It further said that at least 51 percent of the voting equity shares of the NOFHC shall be held by companies in the promoter group, in which the public hold not less than 51 percent of the voting equity of such companies.
"Essentially, the intention is that existing groups should set up banks and not groups set up for this purpose.
However, individuals belonging to the promoter group can participate in the voting equity shares of the NOFHC.. But they together cannot hold more than 49 percent of the voting equity shares of the NOFHC," RBI said.
Clarifying on the 51 percent public shareholding in the NOHFC, RBI said 'public shareholding' implies that no person along with his relatives and entities in which he and/or his relatives hold not less than 50 percent of the voting equity shares, by virtue of his shareholding or otherwise, exercises 'significant influence' or 'control' over the NOHFC, but not necessary that this firm must be listed.
Further it said 51 percent shareholdings only apply for entities/groups in the private sector that are 'owned and controlled by residents'.
On promoter group firms with less than 51 percent public holding would get any grace period to increase public holding to over 51 percent, the RBI said, at the time of making applications, they will have to furnish a road-map to comply with the requirements of the corporate structure indicated.
"After the 'in-principle approval' is accorded by RBI for setting up of banks, the actual setting up of NOFHC and the bank, re-organisation of the promoter group entities to bring the regulated financial services entities under the NOFHC as well as realignment of business among the entities under the NOFHC have to be completed within 18 months from the date of in-principle approval or before commencement of banking business, whichever is earlier," RBI said.
It also said while it has prescribed the "preferred structure", the views of its counterparts SEBI and Irda "will prevail" on any vexed issue.
"Queries were raised on adherence to different sector specific requirements. Such issues were examined in consultation with SEBI and Irda," it said, adding any specific views expressed by these regulators would prevail.
Regarding financial groups setting up banks, the existing NBFC must transfer all regulated financial services business to a new company and shares in that company must be held by the NOFHC. Conversion of the NBFC into a NOHFC would enable meeting the 51 percent public float norms.
The RBI also made it clear that no non-resident shareholder will be permitted to hold 5 percent or more in the paid up voting equity capital of the bank for a period of five years from the commencement of the business of the bank.
With regard to conglomerates, it said it is not necessary that all companies in the promoter group have to set up the wholly-owned NOFHC to get a banking licence but all the regulated financial services entities, in which the promoter group has 'significant influence' or 'control', shall be held by the NOFHC, and that, such entities cannot hold shares in the NOFHC.
It also said an NOFHC cannot be a listed entity but has to be wholly-owned by the promoters, and that the shares of an NOFHC can be held by individuals, corporate entities and companies belonging to the promoter group and that LLPs and trusts cannot own its shares.
Significantly, it said only non-financial services companies/entities and non-operative financial holding company in the group and individuals belonging to promoter group will be allowed to hold shares in the NOFHC.