A committee at the Reserve Bank of India (RBI), the country’s central bank, has proposed a series of changes to revamp the country’s banking sector.

The changes allow industrial conglomerates such as non-banking finance companies (NBFC’s) and payment banks to set up a bank.

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According to the panel’s recommendations, a NBFC with INR500bn ($6.75bn) and above in total assets, can convert into a bank after operating for ten years.

Small finance banks and payments banks can set up a bank within six years from the date of reaching net worth equivalent to universal banks’ capital requirement.

Otherwise, they can be listed within ten years from the date of commencement of operations, whichever is earlier.

For universal banks, the minimum capital requirement has been increased to INR10bn from INR5bn, and for small finance banks, from INR2bn to INR3bn.

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These industrial houses will act as bank promoters.

Additionally, RBI has recommended increasing the cap on promoter stake in private sector banks to 26% of the paid-up equity after 15 years of operation.

Currently, promoters’ stake in private sector lenders is capped at 40%, which should be reached within three years and to 15% within 15 years.

The latest move comes after RBI constituted a five-member internal working group (IWG) to review the ownership and corporate structure guidelines for private sector banks (PSBs), back in June 2020.

In the same month, the central bank also issued guidelines related to on-tap licensing of universal banks and industrial houses operating as small finance banks.

The IWG has submitted the proposed changes in a report and RBI is inviting comments on the report until 15 January 2021.