The Reserve Bank of India (RBI) has issued guidelines for on-tap licensing of universal private banks, which will allow eligible entities to apply for licences whenever they choose to as opposed to the current limited-period window for applications.

Under the new guidelines, resident individuals and professionals with 10 years of experience in banking and finance will be allowed to promote universal banks, RBI said in a statement.

Moreover, entities/groups in the private sector owned and controlled by residents and existing NBFCs controlled by residents with a minimum track record of 10 years are both eligible as promoters.

The eligibility is on the pretext that they have total assets of INR50bn or more and the non-financial business of the group does not contribute 40% or more in terms of total assets/in terms of gross income.

However, large industrial houses have been excluded as eligible entities, though they are allowed to invest up to 10% in the banks.

The promoter/promoting entity/promoter group should have a track record of at least ten years of sound financials, credentials, integrity, RBI said.

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Further, the new guidelines make a Non-Operative Financial Holding Company (NOFHC) non-mandatory for creating a bank if the promoters are individuals or stand-alone promoting/converting entities without any other group entities.

The regulator states that in the event of a bank set up through an NOFHC, a promoter/promoter group should own not below 51% of the total paid-up equity capital in the holding company.

Under the new guidelines, initial minimum paid-up voting equity capital for a bank will be INR5bn, following which the bank will have a minimum net worth of INR5bn at all times. Foreign shareholding in universal banks would be capped at 74% as per existing rules.

The banks are also mandated to get their shares listed on the stock exchanges within six years of the start of business, and have to set up at least 25% of their branches in unbanked rural centres.