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๐๐ž๐ฐ ๐๐š๐ง๐ค ๐‹๐ข๐œ๐ž๐ง๐ฌ๐ž๐ฌ ๐ข๐ง ๐ˆ๐ง๐๐ข๐š: ๐‘๐๐ˆ ๐‘๐ž๐œ๐จ๐ง๐ฌ๐ญ๐ข๐ญ๐ฎ๐ญ๐ž๐ฌ ๐’๐ญ๐š๐ง๐๐ข๐ง๐  ๐„๐ฑ๐ญ๐ž๐ซ๐ง๐š๐ฅ ๐€๐๐ฏ๐ข๐ฌ๐จ๐ซ๐ฒ ๐‚๐จ๐ฆ๐ฆ๐ข๐ญ๐ญ๐ž๐ž

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The Reserve Bank of India (RBI) has reconstituted the Standing External Advisory Committee (SEAC), which will oversee the evaluation of license applications for universal and small finance banks (SFBs). This committee will operate under the chairmanship of former RBI Deputy Governor Mr. M.K. Jain.

๐‚๐จ๐ฆ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง ๐จ๐Ÿ ๐ญ๐ก๐ž ๐’๐„๐€๐‚
The reconstituted SEAC also includes:
(a) Revathi Iyer: Director, Central Board, Reserve Bank of India (RBI).
(b) Parvati V. Sundaram: Former Executive Director, Reserve Bank of India (RBI).
(c) Hemant G. Contractor: Former Managing Director, State Bank of India and Former Chairman, Pension Fund Regulatory and Development Authority (PFRDA).
(d) N.S. Kannan: Former Managing Director and CEO, ICICI Prudential Life Insurance Company Limited

The tenure of the committee is set for 3 years.

๐‹๐ž๐ ๐š๐ฅ ๐…๐ซ๐š๐ฆ๐ž๐ฐ๐จ๐ซ๐ค ๐š๐ง๐ ๐‡๐ข๐ฌ๐ญ๐จ๐ซ๐ข๐œ๐š๐ฅ ๐๐š๐œ๐ค๐ ๐ซ๐จ๐ฎ๐ง๐

Legally both licenses are obtained under the Bank Regulation Act, 1949 and the guidelines framed by the RBI. Historically, Universal Banks were conceptualized as Development Financial Institutions (DFIs) by the Narsimham Committee, 1991 while SFBs were introduced by the Raghuram Rajan Committee, 2009.

While universal banks offer a comprehensive range of financial services to a broad customer base, SFBs has restrictions on lending (for instance โ€“ atleast 75% of the overall loans to amounts below 25 lakhs), branch, capital adequacy, priority sector, etc.

๐–๐ก๐š๐ญ ๐ข๐ฌ ๐ญ๐ก๐ž ๐ฅ๐ข๐œ๐ž๐ง๐ฌ๐ข๐ง๐  ๐ฉ๐ซ๐จ๐œ๐ž๐ฌ๐ฌ?

(a) ๐ˆ๐ง๐ข๐ญ๐ข๐š๐ฅ ๐’๐œ๐ซ๐ž๐ž๐ง๐ข๐ง๐  ๐›๐ฒ ๐‘๐๐ˆ:ย Applications are reviewed for prima facie eligibility and ‘fit and proper’ criteria.
(b) ๐’๐„๐€๐‚:ย Applications are evaluated by the SEAC which examines the suitability and considers the interest of depositors vis-a-vis the applicant. The evaluation may recommend additional conditions before considering approval.
(c) ๐ˆ๐ง๐ญ๐ž๐ซ๐ง๐š๐ฅ ๐’๐œ๐ซ๐ž๐ž๐ง๐ข๐ง๐  ๐‚๐จ๐ฆ๐ฆ๐ข๐ญ๐ญ๐ž๐ž (๐ˆ๐’๐‚):ย Recommendations from SEAC are reviewed by the ISC, which includes the Governor and Deputy Governors of the Reserve Bank of India (RBI).
(d) ๐…๐ข๐ง๐š๐ฅ ๐€๐ฉ๐ฉ๐ซ๐จ๐ฏ๐š๐ฅ ๐›๐ฒ ๐ญ๐ก๐ž ๐‚๐ž๐ง๐ญ๐ซ๐š๐ฅ ๐๐จ๐š๐ซ๐ ๐จ๐Ÿ ๐‘๐๐ˆ:ย In-principle approval is granted for 18 months, post which a regular license is issued upon compliance.

Unlike appeals against orders of SEBI, ๐๐…๐‘๐ƒ๐€, ๐ˆ๐‘๐ƒ๐€๐ˆ before Securities Appellate Tribunal, RBI lacks a dedicated appellate tribunal. Aggrieved parties can seek a government review or file a writ petition in the High Court under the RBI Act.

This is an interesting development in the Indian Economy.

A copy of the press release is enclosed. Readers can share their views with Regstreet Law Advisors at info@regstreetlaw.com.

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