1. The minimum paid-up capital for a new bank shall be Rs.200 crore.
2. The initial capital shall be raised up to Rs.300 crore within three years of commencement of business.
3. The minimum promoters’ contribution shall be 40 percent of the paid-up capital of the bank.
4. The initial capital, other than the promoters’ contribution, may perhaps be raised through public issue or private placement.
5. While expanding capital to Rs.300 crore within three years of commencement of business, the promoters will have to bring in additional capital, which would be at least 40 percent of the fresh capital raised.
6. Capital will be locked in for a minimum period of 5 years from the date of receipt of capital by the bank.
7. The new bank should not be sponsored by a large industrial house.
8. Though, individual companies, directly or indirectly connected with large industrial houses may be allowed to participate in the equity of a new private sector bank up to a maximum of 10 percent who will not have controlling interest in the bank.
9. The proposed bank shall maintain an arm’s length relationship with business entities in the promoter group and the individual company/is investing up to 10% of the equity as stipulated.
10. The relationship among business entities in the promoter group and the proposed bank shall be of like between two independent and unconnected entities

Other Requirement to be followed for Conversion of NBFC into Bank Application for Conversion of NBFC into Bank:

1. The NBFC should have a minimum net worth of Rs.200 crore in its latest balance sheet which shall increase to Rs.300 crore within three years from the date of conversion.
2. The NBFC should not have been promoted by a large Industrial House or owned/controlled by public authorities, which includes Local, State or Central Governments also.
3. The NBFC shall acquire a credit rating of not less than AAA rating (or its equivalent) in the previous year.
4. The NBFC should have an impeccable track record in compliance with RBI regulations/directions and in repayment of public deposits and no default should have been reported.
5. The NBFC wishing to convert into the bank should have a capital adequacy of not less than 12 percent and net NPAs of not more than 5 percent.
6. The NBFC on conversion to a bank will have to comply with Capital Adequacy Ratio and all other requirements such as lending to priority sector, promoters’ contribution, lock-in period for promoters’ stake, dilution of promoters’ stake beyond the minimum, NRI and foreign equity participation, arm’s length relationship, etc. as applicable to banks.
7. The bank shall maintain a minimum capital adequacy ratio of 10 percent on a continuous basis
8. The new bank will have to witness priority sector lending target of 40 percent of net bank credit as applicable to other domestic banks.
9. The new bank will be required to open 25 percent of its branches in rural and semi-urban areas.
10. The new bank shall not be permissible to set up a subsidiary or mutual fund for at least three years from the date of commencement of business.
11. The headquarters of the proposed new bank could be in any location in India as decided by the promoters.
12. The new bank shall be governed by the provisions of the Banking Regulation Act, 1949, Reserve Bank of India Act, 1934, other relevant Statutes and the regulations of SEBI regarding public issues and other guidelines applicable to listed banking companies.

How to make an application for conversion of NBFC into Bank:

1. The application shall be prepared and submitted in the prescribed form;
2. The applications shall be accompanied with a project report covering business potential and viability of the proposed bank, the business focus, the product lines, technology capability and other information as may be required;
3. The detailed information on the background of promoters, their expertise, the track record of business and financial worth, details of promoters’ direct and indirect interests in various companies/industries, details of proposed participation by foreign banks/NRI/OCB shall be furnished;
4. Licenses will be issued on a selective basis to those who conform to the requirements stated by RBI and who are likely to conform to the best international and domestic standards of customer service and efficiency;
5. After receiving an application, same will be screened by RBI to ensure prima facie eligibility of the applicants and will be referred to a high-level Advisory Committee to be set up by RBI;
6. The Committee will screen the applications by the procedure set up by them;
7. The decision to issue an in-principle approval for setting up of a bank will be taken by RBI which will be final;
8. The in-principle approval issued by RBI is valid for the period of one year from the date of granting in principle approval and subsequently would lapse automatically;
9. After issue of the in-principle approval issued by RBI for setting up of a bank in the private sector, if any contrary features are noticed subsequently regarding the promoters or the companies/firms with which the promoters are related and the group in which they have interest, the Reserve Bank of India may impose additional conditions and if warranted, it may withdraw the in-principle approval.