NRI banking and technology professionals should turn entrepreneurs in India
RBI Watch Banking Structure
Yesterday, at his inaugural address at the on going Pravasi Bharitya Diwas Prime Minister Narendra Modi exhorted NRIs (Non Resident Indians) to return home .
Last week, The RBI in its clarifications on the guidelines for small finance banks and payments banks has made one thing clear: NRIs are welcome to apply to promote these two new type of banks.
But are not only resident Indians allowed to be promoters? Yes and No.
An NRI or a promoter group including an NRI can submit an application, but the NRI must state clearly that he will become a resident Indian on receiving in principle approval from the RBI. The RBI gives eighteen months to the applicant to fully comply with all the terms and conditions of the in principle license. So, during the eighteen months the NRI will need to change to resident status, and this will be verified by RBI.
I believe NRIs with the capability to put in Rs 40 crores or who can contribute significant capital as part of a promoter group from their net worth - note initial promoter equity needs to be a minimum of 40% of the Rs 100 crores required - should seriously look at the opportunity to start a small finance bank or a payments bank.
There are numerous challenges - the principle one being developing a viable business model these types of niche banks - but India needs fresh blood in the financial services sector. One of the problems with India's financial services sector has been the lack of innovation. Here is an opportunity that the regulator is fully supporting.
The last date for receipt of applications is February 2. The RBI has stated that after it learns from this round's licensing it will introduce an open window , so that applications are scrutinized and licenses issued on a continuous basis.
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