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BS REPORTER Mumbai, 1 January The Reserve Bank of India (RBI) has extended the deadline for submitting applications for small finance banks and payment banks to February 2 against the earlier January 16. The central bank also issued detailed clarifications on the guidelines for these two types of banks based on questions received from prospective applicants. RBI said non- resident Indians ( NRIs) can apply for payment and small finance banks provided they " return ( to India) for good". This means individuals like Vikram Pandit, former Citibank chief, can be a promoter only if he comes back to the country permanently. Otherwise, he has to remain just a minority shareholder. Pandit, according to media reports, was planning to set up a payment or a small bank in association with JM Group. However, payment banks are barred from taking deposits from NRIs. In- bound remittances into accounts maintained by residents with a payment bank will be treated as deposits. According to the regulator, there are no restrictions on payment and small banks from sharing the infrastructure of the parent promoter or promoter group entities, provided there is an agreement to do so at an arms length and suitable firewalls are built in, customer confidentiality is maintained and risk mitigation measures are put in place. The regulator has also allowed a promoter to set up asmall finance bank as well as a payment bank, provided the nonoperative financial holding company ( NOFHC) is the same. "The guidelines indicate that if a promoter, setting up a small finance bank, desires to set up a payment bank, it should set up both types of banks under a NOFHC structure. Otherwise, there is no requirement for the small finance banks to have holding company structure," said RBI. RBI has received 176 and 144 queries from individuals and organisations relating to small finance banks and payment banks, respectively, till December 15. For small finance bank licences, RBI will give preference to those applicants who set up the bank in a cluster of under- banked states and districts, such as in the North- East, East and Central regions of the country. " Other forms of presence such as satellite offices and mobile branches are not considered as full- fledged branches under the requirement to have 25 per cent branches in the unbanked rural centres," said RBI. The regulator also said there is no such stipulation regarding an ideal number of branches a small finance bank shall have to be eligible for the license. There is also no cap on the number of licences proposed to be issued for small finance banks and payment banks. At the time of making applications for payment banks and small finance banks, the promoters or promoter group will have to furnish a plan and methodology to comply with all the requirements of the guidelines within 18 months from the date of in- principle approval or as on the date of commencement of operations, whichever is earlier. BANKABLE Payments bank's primary focus has to be domestic payments Independent KYC checks of customers by payments bank promoted by telecom operator Payment banks can offer locker and vault services Payments bank can be business correspondent ( BC) for as many commercial banks Promoter group can work as BC of payment bank on arms length basis Payment banks are barred from taking deposits from NRIs. In- bound remittances into accounts maintained by residents with a payment bank will be treated as deposits |
| Municipal bond regime might require changes in the Companies Act |
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Mumbai, 1 January The Securities and Exchange Board of India ( Sebi)' s move to introduce a municipal bond framework might need changes in the Companies Act. The regulator is planning to allow debt- raising under a proposed framework for municipal bonds. The new framework will allow bodies governing urban areas to raise debt to meet expenses. Such money will have to have adefinite end- use and cannot be deployed elsewhere, said a concept paper that the regulator put out on Tuesday. "The proceeds of the proposed issue shall be clearly earmarked for a defined project or a set of projects. The funds raised from issue of municipal bonds shall be used only for the projects that are specified under objects in the offer document," it said. The move is based on recommendations from the Corporate Bonds and Securitization Advisory Committee. "For effective implementation of the proposed framework, some consequential amendments may be required to be made to the Companies Act, 2013 and the rules made there under to enable raising of funds by corporate municipal entity through issue of debt securities under the proposed framework," the paper said. The Companies Act has specified certain conditions for listing and trading of debt securities. These include having aboard of directors where one- third of the members are independent; and having to comply with disclosure requirements. The regulator might also allow for increased rates on tax free bonds that municipal bodies issue. "In India, the guidelines issued by the ministry of urban development for issuance of tax- free bonds by municipal bodies provides that only those with an interest rate up to maximum eight per cent per annum shall be eligible for notification by the Central Board of Direct Taxes. A fixed rate of eight per cent, in the prevailing scenario is too little to attract investors to municipal bonds and therefore, there might be flexibility in setting interest rate cap by linking it to a benchmark market rate," it said. The regulator's framework is to allow fund raising by municipal bodies to meet their expenses in the face of growing urbanisation. "The steering committee on urban development for the XIth five- year plan ( 20072012), has estimated that total fund requirement for implementation of the Plan target in respect to urban water supply, sewerage and sanitation, drainage and solid waste management is ₹ 12.7 lakh crore," said the note from the regulator. The Union government has been looking at providing for urbanisation in its annual budget. "As the fruits of development reach an increasingly large number of people, the pace of migration from the rural areas to the cities is increasing. A neo middle class is emerging, which has the aspiration of better living standards. Unless new cities are developed to accommodate the burgeoning number of people, the existing cities would soon become unlivable," said the latest budget speech quoted in the concept paper. "The prime minister has a vision of developing one hundred Smart Cities, as satellite towns of larger cities and by modernising the existing mid- sized cities. To provide the necessary focus to this critical activity, I have provided asum of ₹ 7,060 crore in the current fiscal," the finance ministry had added. The regulator has asked for public comments on the new framework. The last date for sending feedback is January 30. Sebi issues concept paper, feedback by January- end Companies Act The Acthas a number of requirements for listing and trading of debt securities Includes having a board of directors with one- third independent members and disclosure requirements Sebi headquarters BS FILE PHOTO |
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