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.
๐๐จ๐ฆ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง ๐จ๐ ๐ญ๐ก๐ ๐๐๐๐
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.
๐๐๐ ๐๐ฅ ๐
๐ซ๐๐ฆ๐๐ฐ๐จ๐ซ๐ค ๐๐ง๐ ๐๐ข๐ฌ๐ญ๐จ๐ซ๐ข๐๐๐ฅ ๐๐๐๐ค๐ ๐ซ๐จ๐ฎ๐ง๐
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.
๐๐ก๐๐ญ ๐ข๐ฌ ๐ญ๐ก๐ ๐ฅ๐ข๐๐๐ง๐ฌ๐ข๐ง๐ ๐ฉ๐ซ๐จ๐๐๐ฌ๐ฌ?
(a) ๐๐ง๐ข๐ญ๐ข๐๐ฅ ๐๐๐ซ๐๐๐ง๐ข๐ง๐ ๐๐ฒ ๐๐๐:ย Applications are reviewed for prima facie eligibility and ‘fit and proper’ criteria.
(b) ๐๐๐๐: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) ๐๐ง๐ญ๐๐ซ๐ง๐๐ฅ ๐๐๐ซ๐๐๐ง๐ข๐ง๐ ๐๐จ๐ฆ๐ฆ๐ข๐ญ๐ญ๐๐ (๐๐๐):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
๐ข๐ง๐๐ฅ ๐๐ฉ๐ฉ๐ซ๐จ๐ฏ๐๐ฅ ๐๐ฒ ๐ญ๐ก๐ ๐๐๐ง๐ญ๐ซ๐๐ฅ ๐๐จ๐๐ซ๐ ๐จ๐ ๐๐๐:ย In-principle approval is granted for 18 months, post which a regular license is issued upon compliance.
Unlike appeals against orders of SEBI, ๐๐
๐๐๐, ๐๐๐๐๐ 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.
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