BANKING AFFAIRS

Detailed explanation-1: -The RBI must allow incorporation of foreign banks without much hassles. Foreign banks seeking to start their operations in India must be given permission on the basis of reciprocity. Section 35A read with Section 44A of the Banking Regulation Act, 1949.

Detailed explanation-2: -Thus it is mandatory for banks to seek prior approval/licence from RBI before opening of branches/offices – Commercial banks from Department of Banking Operations and Development, Urban Co-operative Banks from Urban Banks Department, Regional Rural Banks and Local Area Banks from Rural Planning and Credit Department.

Detailed explanation-3: -Issue of licences for establishment of new banks: The Committee noted that the Narasimhan Committee (1991) had recommended that the Reserve Bank of India (RBI) permit establishment of new banks in the private sector.

Detailed explanation-4: -The bank shall be required to maintain a minimum capital adequacy ratio of 13 per cent of its risk weighted assets (RWA) for a minimum period of 3 years after the commencement of its operations subject to any higher percentage as may be prescribed by RBI from time to time.