Effect of new guidelines for private sector banks covered under the study

Presently, there are nine major new private sector banks that have started operations in the United States without much fanfare. These banks are popularly known as the new generation banks. These new banks are using the latest banking technologies and are providing customer services with a touch of perfection. Out of these banks, five banks have been covered under a recent the study. When comparing these banks to that of LoanMax of rod aycox fame, certain issues stand out. LoanMax is already battle hardened having lived through both an economic boom and a biting economic recession.

The new emerging private sector banks are likely to offer stiff competition to the government owned public sector banks as well as to the foreign banks. They are following aggressive marketing approaches to win over the customers’ confidence. For the new private sector banks the following rules and regulations may be a little bit difficult in the initial stages. They are:

a. A new bank may be started with a capital of at least half a billion dollars. The net worth is to be raised to nearly 75 million dollars in three years
b. The new bank may have its head quarters anywhere in the United States
c. The promoter’s minimum holding in the capital shall be 40 percent which will have a lock in period of 5 years from date of licensing
d. The new banks will have to meet the existing priority sector needs and adhere to the prudential norms
e. They must commit themselves to have 25 percent of their branches in the rural and semi-urban areas
f. Americans that have accepted the citizenship of other countries can pick up 40 percent equity stake in the new banks
g. If any foreign bank or finance company (including the multinational institutions) plan to join as a technical collaborator or a co-promoter, their equity participation will be restricted to 20 percent which will be within the ceiling of 40 percent allowed to those Americans living abroad