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Banks' expansion into corporate hands not under consideration by the Reserve Bank of India

Discussion by RBI Governor, Sanjay Malhotra, revolves around banking license qualifications, ownership restrictions, and the endurance of the UPI payment system.

Corporate banking licenses not under consideration by the Reserve Bank of India
Corporate banking licenses not under consideration by the Reserve Bank of India

Banks' expansion into corporate hands not under consideration by the Reserve Bank of India

In the ever-evolving world of finance, the eligibility criteria for companies and Non-Banking Financial Companies (NBFCs) to obtain a banking license in India have remained a topic of interest.

On July 25, 2025, the Governor made a statement emphasizing the importance of UPI or any other payments system being accessible, cheap, secure, and sustainable. This statement underscores the government's commitment to financial inclusivity and the provision of efficient and reliable payment solutions.

To obtain a Payment Bank License, an applicant must meet certain criteria set by the Reserve Bank of India (RBI) under Section 22 of the Banking Regulation Act, 1949. Eligible applicants include existing Prepaid Payment Instrument (PPI) issuers, professionals/individuals, NBFCs, supermarket chains, corporate business correspondents, mobile telephone companies, real-estate cooperatives, and public sector units. The application process requires a minimum paid-up equity capital of Rs. 100 crore, along with detailed documentation such as a project report demonstrating viability, business plan, and proposed financial services, as stipulated by RBI norms.

For a Full Banking License, the RBI's criteria focus on factors like financial soundness, promoters' credibility, business plans focusing on financial inclusion and innovation, and capital adequacy. However, the exact minimum equity requirements and eligibility specifics may differ from Payment Banks. NBFCs applying for banking licenses must demonstrate financial credibility and meet RBI’s stringent guidelines, including minimum capital and fit-and-proper criteria for directors.

As of mid-2025, there are ongoing discussions about easing certain restrictions to allow large corporates to set up banks in India. These proposals often center on relaxing promoter shareholding restrictions, raising or modifying capital requirements, or expanding eligibility to enable greater participation by corporate entities in the banking sector. However, no finalized regulatory changes have been publicly enacted yet.

It's important to note that NBFCs play a critical role in India's financial landscape and may apply for banking licenses if they meet RBI’s rigorous criteria. Foreign direct investment in private banks has limits, which governs corporate ownership structures in banking. Detailed KYC, transparency, and regulatory compliance as per RBI guidelines continue to be mandatory for applicants.

In conclusion, to obtain a banking license, companies or NBFCs must meet RBI’s capital and operational criteria. While discussions about relaxing criteria for corporates exist, no confirmed regulatory changes have been implemented as of July 2025. The sustainability of UPI, as with any payments system, depends on someone bearing the cost. The RBI has placed limits to prevent any individual entity from exercising undue control over the management of a bank.

  1. The eligibility criteria for NBFCs to obtain a banking license in India's banking-and-insurance industry have been a subject of ongoing interest, mirroring the evolving world of finance.
  2. The Governor's statement on July 25, 2025, emphasized the necessity of a payments system being accessible, cheap, secure, and sustainable, highlighting the government's focus on financial inclusivity and efficient payment solutions.
  3. Applicants seeking a Payment Bank License in India must adhere to the Reserve Bank of India's (RBI) criteria, including meeting capital requirements, submitting detailed documentation, and demonstrating viability in their business plans.
  4. NBFCs applying for Full Banking Licenses are assessed based on factors such as financial soundness, promoters' credibility, business plans focusing on financial inclusion and innovation, and capital adequacy.
  5. There are ongoing discussions about easing certain restrictions to permit large corporates to establish banks in India, with proposals focusing on modifying promoter shareholding restrictions, raising or changing capital requirements, and expanding eligibility.
  6. Foreign direct investment in private banks has limits that shape corporate ownership structures in banking, while comprehensive Know Your Customer (KYC), transparency, and regulatory compliance as per RBI guidelines remain mandatory for applicants. The sustainability of the Unified Payments Interface (UPI) or any other payments system depends on someone bearing the cost.

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