Want to open your own bank? Just make sure your last name isn’t Ambani, Tata or Birla

In what could be a shock to many large business houses in India that have long dreamt of opening their own banks, the RBI has said that it would be individuals who could be allowed to set up such institutions.

The new draft rules of RBI propose a minimum capital of Rs 500 crore for granting on-tap licence to new "universal banks," which would work like high-street lenders and would deal in loans, deposits and other fee-based services.

As of now, the doors are said to be opened to professionals with a minimum experience of 10 years, while also giving large non-banking finance companies an opportunity to convert into banks. However, for large businesses, RBI has said that industrial houses and conglomerates with more than 40% of total business from non-financial activities will not be allowed to promote banks.

As per new rules, conglomerates having total assets of Rs 5,000 crore and 60% of their business in financial services would be able to apply for a banking licence.

While on one hand, RBI wants to allow more banks and foster competition in this space, it has also put restrictions on large business houses running banks, knowing that several influential business groups in India have been dreaming of bagging banking licences.

In the process of granting these licences, RBI will prefer entities that have diversified shareholdings. It was last year that it had approved 20 new institution formations, with both small and payments banks, so that disbursal of small-ticket loans can be improved.

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