Corporate Structure The NOFHC needs to ensure that no person should be a Director in the Board of Directors for any

y other NOFHC or bank. The RBI wants to avoid any conflict of interest. A company registered under Section 25 of the Companies Act , 1956 - Section 25 companies are those companies which are formed for the sole purpose of promoting commerce, art, science, religion, charity or any other useful object and have been granted a license by the central government recognizing them as such. The NOFHC needs to ensure that the persons managing the NOFHC should focus on the new banking entity and do not have any engagements in any other business or vocation. The Independent Directors referred to above shall have special knowledge or practical experience in respect of one or more of the following matters, namely, Accountancy, (b) Agriculture, rural economy and co-operation, (c) Banking, (d) Insurance, (e) Economics, (f) Finance, (g) Micro, Small and Medium Enterprises (MSME), (h) Law; or, (i) any other matter, the special knowledge of, and practical experience in, which would, in the opinion of the Reserve Bank, be useful to NOFHC. NOFHC shall have a Remuneration Committee of the Board to decide on the compensation payable to the key management executives of NOFHC.

Exposure Norms NOFHC cab invest in bank deposits , money market instruments , govt securities and actively traded bonds and debentures Banks credit and investment exposure to other entities under NOFHC shall be restricted by single and group exposure limits The credit exposure to single borrowers shall not exceed 15 per cent of capital funds of the FI. However, the exposure may exceed by additional five percentage points (i.e., up to 20 per cent) provided the additional credit exposure is on account of infrastructure projects. The credit exposure to the borrowers belonging to a group shall not exceed 40 per cent of capital funds of the FI. However, the exposure may exceed by additional ten percentage points (i.e., up to 50 per cent) provided the additional credit exposure is on account of infrastructure projects.

Business Model The RBI wants the new banks to move forward to achieve financial inclusion. The financial inclusion plan must be integrated with the business plan The Applicants will have to show their due commitment to promote rural banking and financial inclusion as against more profitable commercial and urban retail banking. The requirement will put pressure on new players to compete with existing players who have established their network in more lucrative urban markets.

For a new banking entity, it will be stumbling block as the brick and mortar model especially in rural areas take time to turn profitable. Ultra- small branches - The USB shall be managed full time by at least one bank officer with laptop, having connectivity with CBS, Manpower may increase with the increase in business volume, The branch shall have normal business hours as the base branch, BCA shall be present on all working days and shall deal with all cash transaction and other services assigned to BCA, Such Ultra Small Branches should have a pass book printer and a safe for cash retention.

Other conditions In taking a view on whether an entity belongs to a particular Promoter Group or not or whether the entities are linked / related to the Promoter Group. The RBI wants to create a level playing field for the new players as well as the existing players who are subject to these guidelines The RBI wants banks to adopt this service oriented architecture to improve banking operations, reduce costs and provide scalability. As compared to the last decade, core banking vendors now provide innovative and cost efficient products to suit the needs of the banks. It will ensure that all the banks that get the license or are eligible for the license will comply to the terms and conditions of the guidelines. Additional Conditions (a) Promote a bank, if some or all the activities undertaken by the NBFC are not permitted to be undertaken by banks departmentally. In such cases, the activities undertaken by the NBFC which banks are allowed to undertake departmentally, will have to be transferred to the new bank, or (b) Convert the NBFC into a bank, if all the activities undertaken by it are allowed to be undertaken by a bank departmentally. In such a case, the NBFC shall have a minimum net worth of `5 billion, or (c) Convert the NBFC into a bank and divest the activities which banks are not allowed to undertake departmentally. In such a case, the bank shall have a minimum net worth of `5 billion. RBI will consider allowing the bank to take over and convert the existing NBFC branches into bank branches only in the Tier 2 to 6 centres. Existing branches of the NBFC in Tier 1 centres may be allowed to convert into bank branches only with the prior approval of RBI and subject to the existing rules / methodology applicable to domestic banks regarding opening of branches in these centres

BANKING LICENSE EVALUATION PROCESS

Who are likely to conform to the best international and domestic standards of customer service and efficiency. Therefore, it may not be possible for RBI to issue licenses to all the applicants meeting the eligibility criteria prescribed above. The High Level Advisory Committee will comprise eminent persons with experience in banking, financial sector and other relevant areas. Committee will submit its recommendations to RBI for consideration. After issue of the in-principle approval for setting up of a bank, if any adverse features are noticed subsequently regarding the Promoters