The Reserve Bank of India (RBI) has proposed setting up wholesale and long-term finance (WLTF) banks to finance industrial and infrastructure projects with higher capital and non-reliance on savings deposits. The RBI paper has proposed a higher level of initial minimum paid-up equity capital, say Rs 1,000 crore or more, for these banks.
Initial minimum capital
For universal banks, the initial minimum paid-up voting equity capital for a bank is fixed at Rs 500 crore. In the case of differentiated banks such as payments banks (PBs) and small finance banks (SFBs), the initial minimum paid-up equity capital is Rs 100 crore. They have to heavily invest in information technology and skill building to mitigate the risks.
About wholesale banks
According to the RBI, WLTF banks are not expected to have significant retail exposure. Primary sources of funds for WLTF banks could be a combination of term deposits, debt / equity capital raised from primary market issues or private placement, and term borrowings from banks and other financial institutions. Another major source of funds for WLTF banks will be issuance of bonds.
WLTF banks are not expected to accept savings deposits. Current account and term deposits may be mobilized by these banks. There could be reasonable restrictions on premature withdrawal of these deposits.According to the Nachiket Mor Committee Report, since the primary role of the wholesale banks is lending and not the provision of retail deposit services, they may be permitted to accept deposits only above a large threshold amount.