How much money is needed to open a bank..A gang operating a fake “PNL Bank” has been busted.

The Karnal police in Haryana have busted a gang that defrauded people of crores of rupees by opening a fake bank. This fake bank, named PNL Bank, allegedly committed fraud of approximately 1.5 crore rupees. Police say the perpetrators of this bank lured people with promises of doubling their money within 26 months.

They lured people with promises of higher interest rates than other recognized banks. Once a substantial amount was deposited, the accused would close the branch and flee. So, let’s learn how to open a bank, what types of banks exist, and what are the conditions?

License has to be obtained from Reserve Bank

In India, the Reserve Bank of India serves as the regulatory body for banks. Opening any commercial bank requires a license from the Reserve Bank and adherence to its guidelines. On February 22, 2013, the Reserve Bank issued guidelines for opening new banks. Under these guidelines, new banks must comply with the Banking Regulation Act of 1949 and all existing standards.

Before issuing a license for any new bank, the Reserve Bank takes utmost care to ensure that ordinary people’s money is not lost. It also ensures that economic power is not concentrated in a few hands. Therefore, several conditions have been set for opening a bank.

Who can open a bank?

Individuals or professionals who are natives of India and have 10 years of experience in banking and finance as a senior officer can apply to open a bank. Additionally, any private sector entity or group controlled or owned by Indian citizens with at least 10 years of experience is also eligible to open a bank, provided the entity or group has total assets of ₹50 billion or more. To prevent the concentration of economic power, large industrial houses are not permitted to open new banks. However, they can invest up to 10 percent in new banks.

Conditions for opening a bank

• According to the conditions for opening a bank, the promoter, promoter group or NOFHC must hold at least 40 per cent of the paid-up voting equity capital of the bank, which must remain so for five years from the date of inception.
• The shareholding of these promoters, promoter group or NOFHCs in the bank should be reduced to 15 per cent within 15 years from the date of commencement of operations of the bank.
• To open a new bank, the paid-up voting equity capital must be at least ₹5 billion. This means that the bank must have a minimum capital of ₹5 billion at all times.
• The limit of foreign direct investment in any bank is decided under the foreign direct investment policy applicable in the country.
• In this, the promoter or promoter group must hold shares within a certain limit. Currently, the foreign direct investment limit in the banking sector in India is 75 percent.
• The new bank is required to open at least 25% of its new branches in unbanked rural areas and also meet priority sector lending targets.
• When a new bank starts its business, it has to get its shares listed on the stock exchanges within six years.

How many types of banks are there in India?

Banks in India are classified according to various criteria. The central bank, the Reserve Bank of India, acts as the banker of banks. There is only one such bank in the country. Other types of banks include cooperative banks, commercial banks, regional rural banks, local area banks, specialized banks, small finance banks, and payments banks.

• Cooperative Banks: These banks operate under state government legislation. They provide short-term loans to agriculture and related sectors. Their primary goal is to promote social welfare by providing loans at low rates.
• Commercial banks: They operate under the Banking Companies Act of 1956 and their primary objective is to generate profits. These banks are of three types: Public sector banks, meaning banks in which the majority of their shares are held by the government or the country’s central bank. Private sector banks, meaning banks in which the majority of their shares are held by a private organization, an individual, or a group of individuals. Foreign banks, meaning banks headquartered in other countries, operate branches in India.

  

  HDFC Bank.

• Regional Rural Banks: These are special commercial banks that provide loans to agriculture and rural areas at low interest rates. These banks operate under the Regional Rural Banks Act of 1976. These banks are essentially joint ventures, with 50 percent stake held by the central government, 15 percent by state governments, and 35 percent by commercial banks.
• Local Area Banks: These were established in 1996 and fall under the private sector. Registered under the Companies Act of 1956, they operate with a profit-making mission. Currently, most of these banks are located in South India.
• Specialized Banks: Some banks are established for specific purposes. These are called specialized banks. For example, the Small Industries Development Bank of India provides loans only to small industrial units and businesses. Similarly, the Export and Import Bank of India (EXIM Bank) provides loans only for import and export needs. The National Bank for Agriculture and Rural Development also falls into this category, providing financial assistance for rural, handicraft, and agricultural development.
• Small Finance Banks: These banks provide financial assistance and loans to micro-enterprises, small farmers, and the unorganized sector of society. They are governed by the country’s central bank.
• Payments Banks: A new concept in banking has been introduced by the Reserve Bank of India. Under this, payments banks have been launched, where account holders can deposit up to ₹1 lakh in their accounts. Loans or credit cards cannot be applied for against these accounts. Some of the country’s payments banks include Airtel Payments Bank, India Post Payments Bank, Fino Payments Bank, Jio Payments Bank, Paytm Payments Bank, and NSDL Payments Bank.