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Draft Guidelines for Licensing of New Banks in Private Sector

India

In the Draft Guidelines the RBI has indicated that certain amendments to the Banking Regulation Act, 1949 are under consideration of the Government of India, including a few which are vital for finalisation and implementation of the policy for licensing of new private sector banks. Taxand India summarise the key provisions and compared them with the 2011 Guidelines. Vital amendments relate to:

  • Removal of restriction of voting rights
  • Concurrently empowering the RBI to approve acquisition of shares and / or voting rights of 5 percent or more in a bank, to a person whom the RBI considers as 'fit and proper'
  • Empowering the RBI to supersede Board of Directors of a bank, so as to protect depositors' interests
  • Facilitating consolidated supervision

The Final Guidelines will be issued and the process of inviting applications for setting-up new private sector banks will be initiated only after the BRA is amended for the above.

Taxand India summarise the key provisions of the Draft Guidelines and compared them with the 2001 Guidelines

Taxand's Take


The New Draft Guidelines are a step in the right direction. However, given that the RBI has indicated that the Final Guidelines will be issued and the process of inviting applications for setting up new banks will be initiated only after the necessary amendments are brought about to the BRA, it may be some time before we see the actual roll out of any new private sector banks in India.

Your Taxand contact for further queries is:
Mukesh Butani
T. +91 124 339 5010
E. mukesh.butani@bmrlegal.in

Taxand's Take Author