Clarifications to Queries on Guidelines for Licensing of New Banks in the Private Sector
In providing the clarifications, an attempt has been made to assist potential applicants in understanding the terms of the guidelines. The clarifications are specific to the queries and must be read in the overall context of the guidelines.
Q.1. Is it compulsory for the NOFHC to have individuals as promoters?
Q.2. Where the promoter of NOFHC meets with condition of 2(C)(ii)(b), whether individual promoter/ his relatives / entities in which they hold more than 50 per cent shares must hold equity shares in NOFHC [refer 2(C)(ii)(a)].
Q.3. Where a promoter is an individual and his relatives and entities in which they hold more than 50% shares, is it necessary that the promoter, his relatives, entities in which they hold more than 50% shares must hold equity shares in NOFHC [refer 2(C)(ii)(a)]. In other words, is holding shares by individual promoters / their relatives / their entities a pre-requisite?
Q.4. Since this guideline mentions that capital structure of NOFHC shall consist of item (a) and item (b), would it be mandatory that a part of NOFHC equity (not exceeding 10%) must be held by any individual belonging to the Promoter Group, along with his relatives / entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares?
A.(1 to 4) It is not necessary that individual alongwith his related parties have shareholding in the NOFHC. However, if any individual belonging to the Promoter Group chooses to become a promoter of the NOFHC, he along with his relatives (as defined in Section 6 of the Companies Act 1956) and along with entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares can hold voting equity shares not exceeding 10 per cent of the total voting equity shares of the NOFHC. [para 2 ( C ) (ii) (a) of the guidelines]
Q.5. Is it possible that ten independent individuals holding voting equity shares not exceeding 10 per cent each of the total voting equity shares of the NOFHC, be the promoters and set up this NOFHC?
Q.6. Can 10 or more unrelated individuals act as promoters each holding not more than 10 per cent shares in NOFHC?
Q.7. Can 10 individual promoters holding not more than 10% shares each alone can also set up the NOFHC, as mentioned in 2C(ii)(b)?
A.(5 to 7) No. The requirement is that not less than 51 per cent of the voting equity shares of the NOFHC shall be held by companies in the Promoter Group, in which the public hold not less than 51 percent of the voting equity of such companies. If 10 independent individuals form a Group, then such a Group cannot satisfy the above criteria laid down for holding the NOFHC. Additionally, such newly formed Promoter Group would not be able to meet one of the ˜Fit and Proper™ criteria, which requires Promoters/Promoter Groups to have a successful track record of running their business for at least 10 years. Essentially, the intention is that existing groups should set up banks and not groups set up for this purpose. However, it is clarified that individuals belonging to the Promoter Group can participate in the voting equity shares of NOFHC.
While any such individual along with his relatives (as defined in Section 6 of the Companies Act 1956) and along with entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares, can hold voting equity shares not exceeding 10 per cent of the total voting equity shares of the NOFHC, all such individuals (along with their relatives and companies as specified above) irrespective of their numbers, cannot hold more than 49 per cent of the voting equity shares of the NOFHC (since the companies forming part of the Promoter Group whereof companies in which the public hold not less than 51 per cent of the voting equity shares shall hold not less than 51 per cent of the total voting equity shares of the NOFHC).[ para 2 ( C )(ii) (a) and (b) of the guidelines]
Q.8. Is it compulsory for a public listed company to be a Promoter / Promoter Group of the NOFHC? Does it mean that such promoter group companies should be listed companies where public holds at least 51per cent of the voting shares?
Q.9. With reference to condition 2(C)(ii)(b), whether the companies which form part of promoters group where public holds not less than 51 per cent of voting capital, have to be listed companies at the time of application for banking license? Are these companies required to continue to remain listed?
Q.10. W.r.t. 2(C)(ii)(b), the companies which form part of promoters group where public holds not less than 51% of voting capital has to be a listed company?
Q.11. Is it mandatory to have a public company as a part of the Promoter Group?
Q.12. W.r.t. 2(C)(ii)(b), is it mandatory to have a public company which has more than 51% shareholding in the NOFHC as part of the promoter group?
Q.13. Please also clarify whether ˜public™ shareholding in an entity presupposes listing of equity shares of that entity
A.(8 to 13) The requirement is that the companies in the Promoter Group in which the public hold not less than 51 per cent of the voting equity shares shall hold not less than 51 per cent of the total voting equity shares of the NOFHC.[ para 2 (C) (ii) (b) of the guidelines]
A company in which public holds 51 per cent need not necessarily be listed. For the purpose of these guidelines, ˜public shareholding™ implies that no person along with his relatives (as defined in Section 6 of the Companies Act, 1956) and entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares, by virtue of his shareholding or otherwise, exercises ˜significant influence™ or ˜control™ (as defined in Accounting Standard 23) over the company.
Q.14. Does this condition (51 per cent shareholdings by a listed company) only apply for entities / groups in the private sector that are ˜owned and controlled by residents™?
A. Yes. The condition (not less than 51 per cent of the total voting equity shares of the NOFHC to be held by the companies in the Promoter Group, which have not less than 51 percent public shareholding) is applicable to the companies in the Promoter Groups in the private sector that are ˜owned and controlled by residents™[as defined in Department of Industrial Policy and Promotion(DIPP) Press Note No.2, 3 and 4 of 2009/FEMA Regulations as amended from time to time].However, such a company need not necessarily be listed.[para 2 (A) and (C) (ii) of the guidelines]
Q.15. Since the Promoters / Promoter Groups with an existing NBFC will have to set up NOFHC, whether such NOFHC will also have to comply with 51per cent public holding condition?
A. The NOFHC has to be wholly owned by the Promoters/Promoter Group. However, at least 51 per cent of the voting equity shares of the NOFHC have to be held by companies in the Promoter Group in which public hold not less than 51 per cent of the voting equity of those companies.[para 2 (C) (ii) (b) of the guidelines]
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