With the Finance Minister's announcement that RBI is considering issue of fresh bank licences to private sector players and finance companies, if they meet the RBI eligibility criteria, there will be more competition in Banking. Already, Religare, Shriram Group, Birla Group, Anil Ambani Group and Bajaj Group said that they would be interested in a banking license.IDFC, Exim Bank and SIDBI have also shown interest. At present, there are 15 old private sector banks and 7 new private sector banks operating in the country. The last time RBI had granted approval for setting up or a conversion of an NBFC into a bank was in 2002 when it granted an "in-principle" approval to Kotak Mahindra Finance Ltd (KMFL) and three Indian finance professionals who had teamed up with Rabo In-dia to set up a commercial bank- Yes Bank.
However the new aspirants will have to fulfill a host of RBI guidelines. According to the current guidelines, a new private sector bank should have a minimum net worth of Rs 300 crore, which is likely to be increased by RBI. Also earlier guidelines laid down by RBI for conversion of NBFCs into a bank had said that the NBFC should not have been promoted by a large industrial house or owned/controlled by public authorities. Among the other conditions, it had also stated that the NBFC should have an impeccable track record in compliance with RBI regulations and in repayment of public deposits and no default should have been reported. Further, no single entity or group of related entities can have a shareholding in excess of 10% in a private sector bank.
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