RBI is letting you set up your own bank; all you need is Rs 500 crore

The Reserve Bank of India (RBI) has come up with new rules and regulations and as per them, you can set up your own bank.

RBI is giving professionals and finance companies a chance to set up banks as the central bank has proposed a minimum capital of Rs 500 crore for granting on-tap licence to new universal banks.

These can run like lenders that offer loans, accept deposits and conduct fee-based services.

As per the RBI rules, a professional with minimum of 10 years experience can apply for a bank’s licence, whereas big non-banking finance companies can convert themselves into banks.

Meanwhile, RBI has barred conglomerates having over 40% of total business from non-financial activities to promote banks.

But, conglomerates with total assets of Rs 5,000 crore and having 60% of their business in financial services can apply for the banking licence but won’t be allowed to hold more than 10% in a bank.

The new rules state that promoters' stake will be locked at 40% for the first five years and the bank will have to be listed within six years.

After five years, the excess stake must be brought down to 30% after 10 years of operations and to 15% after 12 years.

RBI is aiming to bring competition in the banking sector.

"Enabling provisions are fairly liberal for a large number of non-banking finance companies and some select corporates, who can look at the opportunity. This will enhance the level of competition in the banking system having ramifications for existing players," Vimal Bhandari, chief executive officer, Indostar Capital, told ET.

RBI had, last year, given in-principle nod to set up payments banks to enhance disbursal of small loans and services such as remittances.