Control over Organisation of Banks

 Control over Organisation of Banks

Which Authority to grant licence for establishing a new Bank in India – RBI

The following factors are taken into account while considering an application for starting new bank of India

1.    Information about promoters/promoter group

2.    Source of funding of the Capital

3.    Professional management support

4.    Geographical area to be serviced

5.    business mix

6.    Types of economic activities to be performed

7.    Profitability of the operations

Name the authorities which control the functioning of cooperative banks.

Reserve Bank	Branch  licensing  area  of  operations,  exposure  norms,
	interest rates etc.
State Govt.	Incorporation  and  registration  of  Cooperative  Banks,
	Management audit, amalgamation, liquidation / winding up

Branch expansion within the district does not require permission of RBI.

Foreign Banks: Foreign banks are allowed to operate through branches only. A new foreign bank is required to bring in minimum assigned capital of US $ 50 million, minimum capital adequacy ratio 9% on aggregate risk weighted assets of their Indian Operations.

How are Regional Rural Bank formed – Under Section3 of the RRB Act, 1976 a sponsor bank has to apply to the Central Govt. (50:35:15) (Central Govt : Sponsor Bank : State Govt) subscription ratio of the .

Specific permission of RBI is required for closure of branches in Rural Areas.

To accept Non Resident Foreign Currency deposits at specific branches, permission has to be obtained from RBI.

Banks are allowed to Setup Subsidiaries to undertake business authorized under

section 6(1) of the BR Act, 1949. Aggregate Investment in all the subsidiaries shall not exceed 20% of the Banks’ PaidUp Capital

Three-tiers of Organisational Structure

Branch, LHO/Zonal Office, Head Office

Srinivas Kante

Minimum Paid Up Capital – Capital Requirements (21)

(Section 11 of BR Act, 1949)

Incorporated In India

A i.     For a banking company incorporated in India having place of business in more than one state

ii.    If any such place or place of business is or are situated in the City of Mumbai Or Kolkata or both

B ii.    If all places of business in one State but none of which in Mumbai City or Kolkata

v.   For principal place of business

The actual requirement of the Capital is determined by the size of business of each bank. The Present Minimum Capital Adequacy Ratio (CRAR) is 9% comprising of Tier I and Tier II capital and unallocated reserves.

Tier I Capital					Tier II Capital
Paid  Up	Capital,  Statutory			Undisclosed	reserves	and	cumulative
Reserves,		and	other	perpetual preference shares
disclosed free reserves, if				Revaluation Reserves
any and				General Provisions and Loss Reserves
Capital		Reserves		Hybrid Debt Capital Instruments
representing			surplus	Subordinated Debt
arising	out	of	sale
proceeds of assets

Authorised Capital of each public sector bank cannot be less than Rs. 1500 crores.

To establish a new private sector bank, the minimum Paid-Up Capital of Rs.

200 crores.

Foreign Investors are permitted to hold up to 10% of Paid-Up capital of banks established in India.

Shareholders of commercial banks can exercise one vote for every share held by them. However, no person can exercise more than 10% of total voting rights of shareholders of the bank. The above restriction on voting rights does not apply to GOI in respect of holding of shares.

As far as Cooperative Bank is concerned, each share holder can exercise only one vote, irrespective of number of shares held by him.