How to Start a Bank in India

Banking operations are regularized and have serious legislation's guiding the enterprise. The business requires huge funding to start the operation.  
To operate you need to acquire a banking license and focus on a niche. The bank should be technologically driven, modern and staffed by qualified professionals in the banking sector.
Formally, applying for a banking license in India was a herculean task. It could take thirteen years to get and operational license.
However an upgrade has relatively reduced the waiting time and processing. To start a bank you need to judiciously follow the guidelines for establishing such an organization.
How to Start a Commercial Bank
Top 10 Largest Banks in India
The top banks in India are a mix of public company and private sector banks. The top 10 banks are The State Bank of India, ICICI, Punjab National Bank and HDFC. Others include IDBI, Bank of India, Union Bank, Bank of Baroda, Canara Bank and Axis Bank.
  • The State Bank of India
  • ICICI Bank
  • Punjab National Bank
  • HDFC
  • IDBI
  • Bank of India
  • Union Bank of India
  • Bank of Baroda
  • Canara Bank
  • Axis Bank.
Guidelines and Ownership Structure
Promoters of the bank cannot own more than 40% of the bank. NBFCs controlled by resident Indians should have 10 years appreciable success in financial sector.
Appropriate financial and banking experience of individuals not less than 10 years experience is mandatory. To avoid private ownership of banks by industrialist 60% of income and assets should emanate from the financial sector.
Promoter should have clean financial records, no defaults including 10 years financial success. Therefore bank segmentation is as follows 60% financial domain, 40% promoters.
 Voting rights should not exceed 10%. Provisions require a startup net worth of Rs. 500 cr.
How to Start Your own Private Bank
  • Promoters 40% of the bank assets
  • Resident Indians 10 year success in financial sector
  • 10 years Appropriate financial and banking experience
  • Individuals not less than 10 years experience is mandatory
  • Industrialist 60% of income and assets
  • Promoter should have clean financial records
  • no defaults
  • 10 years financial success
  • Startup net worth of Rs. 500 cr.
  • Voting rights should not exceed 10%.
The Bank Functions
The commercial or retail bank has many functions, some are listed below. They could provide loans, issue debit/credit card to customers and take deposits.
Other functions include access to inter-bank transactions and borrow directly from RBI. Banks can open domiciliary accounts and provide loan facilities. They also offer financial advice to customers on different aspects of banking services.
  • Provide loans
  • Issuance of  debit/credit card
  • Accept  deposits
  • Inter-bank transactions
  • borrow directly from RBI
  • Open domiciliary
  • Provide loan facilities
  • offer financial advice to customers
Regulatory Requirements of Established Banks in India
Once the bank is established there are some regulatory rules to follow. The bank is mandated to keep one fifth of deposits in government bonds.
Regular update of activities to RBI and maintenance of capital ratio is essential. The financial institution should meet priority sector lending provisions and ensure financial inclusion of operational demography.
The bank should adhere to MCLR regulations including full disclosure of financial instruments and rates. You need to find out the full operational and regulatory requirement for Indian banks.
  • Keep 1/5  of deposits in government bonds
  • Regular update of activities to RBI
  • Maintenance of capital ratio
  • Meet priority sector lending provisions
  • Ensure financial inclusion
  • Adhere to MCLR regulations

This content is not an investment advice just an information service. We don’t bare any responsibility to the accuracy of this content.


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