RBI Guidelines for Starting a Private Bank in India

RBI has changed the process of getting a license for starting a private bank in India. Earlier, there was no provision for direct application. Interested parties would need to wait until RBI opened bidding for a license. However, now one can apply for a license easily if they qualify.

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The following are the draft guidelines for the process, as released by the RBI:

Licence Requirements

• You must be an individual with over 10 years of experience in the finance/banking domain, or an NBFC or another private sector entity that is controlled by resident Indians with at least 10 years of successful track record.
• You must have a capital of minimum Rs. 500 crore, and a continued minimum net worth of Rs. 500 crore.
• You must have sound credentials and integrity. RBI may perform a background check to verify the same.
• The minimum paid-up voting equity capital of your bank shall be `5 billion, at least initially.
• At least 40% of the bank should be owned by the promoters. In case they have more equity, then they must bring it down to 40% in five years.

Regulatory requirements

As a private bank, you are required to:

• Maintain Basel-level capita ratios
• Meet lending requirements
• Report all activities to RBI
• Keep at least a fifth of your deposits in government bonds …and more

The banking industry is becoming competitive in India. Now that the RBI has made the guidelines less stern, qualified and interested candidates can easily apply for a private bank license.