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Indian central bank proposes to revise licensing policy for universal banks

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Indian central bank proposes to revise licensing policy for universal banks

The ReserveBank of India is proposing to approve universal bank licenses on acontinuous basis; a departure from the current policy, where the central bankonly periodically opens the window for granting bank licenses.

The central bank said May 5 that it proposed a continuousauthorization policy instead of the current "Stop and Go" policy toincrease the level of competition in the banking system.

Under draft guidelines, the RBI excluded large industrialand business houses as eligible promoters for universal banks but did allowthem to invest up to 10% in a new bank. Nonbanking financial companies,experienced individuals and companies that are not part of large conglomeratescan become promoters of universal banks.

The initial minimum paid-up capital for banks is 5 billionrupees and the bank should have a minimum net worth of 5 billion rupees at alltimes.

The RBI is seeking comments on the draft guidelines untilJune 30. Final guidelines will be issued after the central bank receivessuggestions and feedback on the draft guidelines.

As of May 5, US$1 wasequivalent to 66.56 Indian rupees.