RBI tightens rules on banks' large-value deposits
Mumbai: The Reserve Bank of India (RBI) tightened the rules of offering differential interest rates on large size term deposits and also said banks can stop large depositors from premature withdrawal of their money.
Banks can charge different rates of interest only on bulk deposits of above 100 million rupees, higher than previous limit of 1.5 million rupees, the central bank said in a circular on Thursday.
"For deposits below 1 crore (10 million rupees), the same rate will apply for deposits of the same maturity," the RBI said.
The RBI said banks can disallow premature withdrawal of deposits of over 10 million rupees.
The revised guidelines will be applicable from April 1.
Banks can charge different rates of interest only on bulk deposits of above 100 million rupees, higher than previous limit of 1.5 million rupees, the central bank said in a circular on Thursday.
"For deposits below 1 crore (10 million rupees), the same rate will apply for deposits of the same maturity," the RBI said.
The RBI said banks can disallow premature withdrawal of deposits of over 10 million rupees.
The revised guidelines will be applicable from April 1.
http://profit.ndtv.com/news/banking-finance/article-rbi-tightens-rules-on-banks-large-value-deposits-316786
Dos & don’ts of private banking
The Reserve Bank of India published draft guidelines for entry to new private sector banks on August 29, 2011.
The draft suggested that eligible promoters would be entities or groups in the private sector, owned and controlled by residents, with diversified ownership, sound credentials and integrity, and having successful track record of at least 10 years.
It also mentioned that large companies with substantial real estate and capital market exposures would be completely out of the ambit as far as new licences were concerned.
As a prudent step, RBI mentioned that companies with significant (10 per cent or more) income or assets or both, from real estate construction and broking activities, individually or taken together in the past three years would not be eligible to start new banks.
The new banks would be required to have a corporate structure whereby they would be set up only through a wholly-owned non-operative holding company (NOHC) to be registered with the central bank as a non-banking finance company (NBFC), which would hold the bank as well as all other financial companies in the promoter group.
At that time, RBI said the minimum capital requirement would be Rs 500 crore. Subject to this, actual capital to be brought in would depend on the business plan of promoters.
The NOHC would have to hold at least 40 per cent of the paid-up capital of the bank for a period of five years from the date of licensing. Shareholding by NOHC in excess of 40 per cent would be brought down to 20 per cent within 10 years, and to 15 per cent within 12 years from the date of licensing of the bank.
RBI had also proposed that aggregate non-resident shareholding in the new bank would not exceed 49 per cent for the first five years after which it would be as per the extant policy.
The central bank has also insisted on strict compliance with corporate governance code. At least 50 per cent of the directors of the NOHC should be independent. The corporate structure would have to be set up in such a way that it did not impede effective supervision of the bank and the NOHC on a consolidated basis by the Reserve Bank. The business model would have be realistic and viable and must address how the bank proposed to achieve financial inclusion.
The RBI draft also mentioned exposure limits so that there was a check on intra-group lending. Bank exposure to any entity in the promoter group should not exceed 10 per cent and the aggregate exposure to all entities in the group should not exceed 20 per cent of the paid-up capital and reserves of the bank.
The bank would be required to list its shares on stock exchanges within two years of licensing, and must open at least 25 per cent of its branches in unbanked rural centres (with population up to 9,999 as per 2001 census). Existing NBFCs, if considered eligible, would be permitted to either promote a new bank or convert themselves into banks.
The guidelines for entry of new private sector banks was first issued by the Reserve Bank of India (RBI) on June 22, 1993. For well over two decades after the nationalisation of 14 larger banks in 1969, no new bank had been allowed in the private sector.
After nationalisation, public sector banks expanded their branch network considerably and catered to the socio-economic needs of large masses of the population, especially the weaker sections and those in rural areas.
RBI has always maintained that “in the interest of the depositors and the financial system as a whole, and also due to the thrust on financial inclusion, banks should be required to start with sufficient initial capital”. Further, strong capital base would also ensure that the banks withstood any adverse conditions in the financial sector as well as the economy.
The draft suggested that eligible promoters would be entities or groups in the private sector, owned and controlled by residents, with diversified ownership, sound credentials and integrity, and having successful track record of at least 10 years.
It also mentioned that large companies with substantial real estate and capital market exposures would be completely out of the ambit as far as new licences were concerned.
As a prudent step, RBI mentioned that companies with significant (10 per cent or more) income or assets or both, from real estate construction and broking activities, individually or taken together in the past three years would not be eligible to start new banks.
The new banks would be required to have a corporate structure whereby they would be set up only through a wholly-owned non-operative holding company (NOHC) to be registered with the central bank as a non-banking finance company (NBFC), which would hold the bank as well as all other financial companies in the promoter group.
At that time, RBI said the minimum capital requirement would be Rs 500 crore. Subject to this, actual capital to be brought in would depend on the business plan of promoters.
The NOHC would have to hold at least 40 per cent of the paid-up capital of the bank for a period of five years from the date of licensing. Shareholding by NOHC in excess of 40 per cent would be brought down to 20 per cent within 10 years, and to 15 per cent within 12 years from the date of licensing of the bank.
RBI had also proposed that aggregate non-resident shareholding in the new bank would not exceed 49 per cent for the first five years after which it would be as per the extant policy.
The central bank has also insisted on strict compliance with corporate governance code. At least 50 per cent of the directors of the NOHC should be independent. The corporate structure would have to be set up in such a way that it did not impede effective supervision of the bank and the NOHC on a consolidated basis by the Reserve Bank. The business model would have be realistic and viable and must address how the bank proposed to achieve financial inclusion.
The RBI draft also mentioned exposure limits so that there was a check on intra-group lending. Bank exposure to any entity in the promoter group should not exceed 10 per cent and the aggregate exposure to all entities in the group should not exceed 20 per cent of the paid-up capital and reserves of the bank.
The bank would be required to list its shares on stock exchanges within two years of licensing, and must open at least 25 per cent of its branches in unbanked rural centres (with population up to 9,999 as per 2001 census). Existing NBFCs, if considered eligible, would be permitted to either promote a new bank or convert themselves into banks.
The guidelines for entry of new private sector banks was first issued by the Reserve Bank of India (RBI) on June 22, 1993. For well over two decades after the nationalisation of 14 larger banks in 1969, no new bank had been allowed in the private sector.
After nationalisation, public sector banks expanded their branch network considerably and catered to the socio-economic needs of large masses of the population, especially the weaker sections and those in rural areas.
RBI has always maintained that “in the interest of the depositors and the financial system as a whole, and also due to the thrust on financial inclusion, banks should be required to start with sufficient initial capital”. Further, strong capital base would also ensure that the banks withstood any adverse conditions in the financial sector as well as the economy.
Jan 25 2013 , Mumbai
OLD AGE PROBLEMS AND SOLUTIONS
No comments:
Post a Comment