Reserve Bank relents on realty players, brokers in banking
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"The final guidelines have given a lot more clarity and filled the vacuum on issues relating to the holding company. It has also made it very watertight for companies, though giving more time to new banks to list," said Naresh Makhijani, head of financial services tax at KPMG.
The final guidelines released by the RBI on Friday have allowed all corporate and public sector entities including non banking financial companies to apply for new bank permits. This is in contrast to the draft norms that were issued in August 2011 that barred entities with more than 10 per cent income from real estate and broking activities.
"The guidelines have been finalised taking into account the important amendments in December 2012 to the Banking Regulation Act, 1949, the suggestions and comments received on the draft guidelines and in consultation with the Government of India," the RBI has explained. A number of consultants, analysts, industrial and business houses and NBFCs had responded to the draft guidelines of the RBI.
The RBI in its final norms has also relaxed the time line for listing to three years and also increased the time for paring down stake in the NOHFC to three years from the earlier suggestion of two years.
"With corporates prima facie being allowed, I would expect at least 8-10 very serious players with very deep pockets to enter the sector," said Dinesh Thakkar, CMD, Angel Broking.
The final guidelines have also brought in additional conditions such as a higher capital adequacy ratio of 13 per cent as opposed to 12 per cent that was suggested in the draft norms. Analysts argue that this could impact the bottom line and it could take new banks over three years to recover the amount.
The RBI has also laid out strict prudential norms for the NOHFC such as creation of a reserve fund where 25 per cent of the profits would be deposited and exposure norms restricting it from investing in entities belonging to the promoter group.