The Reserve Bank of India, India's central bank, has published draft guidelines on the licensing of new banks, fundamentally favouring resident companies with diversified ownership and less exposure to risky assets. 

Foreign shareholders shall not own more than 49 per cent of the new bank for the first five years, after which it will be as per the extant policy, according to the proposals. 

The RBI said that private sector groups with reputable track records of at least 10 years and those with diversified ownership will be eligible to promote banks. Those with 10 per cent or more exposure to either or both real estate construction and broking activities in the last three years will not.

"Apart from being inherently riskier, real estate and broking activities represent a business model and culture that are misaligned with a banking model," the RBI wrote.

Presently, the Indian banking system is composed of 26 state-run lenders that account for three quarters of the country's total assets. There are 21 private banks in India, representing around 20 to 22 per cent of the market, while the rest is distributed among 34 or so foreign banks.

To register, new banks must go through only a wholly-owned non-operative holding company in order to be registered, the guidelines said. The minimum capital requirement of Rs500 crore ($109 million), although the actual capital to be brought in depends on the promoter's business plan. The NHOC will hold at least 40 per cent of the paid-up capital for five years from the date of licensing. Anything in excess of the said percentage will be brought down to 20 per cent within 10 years and then to 15 per cent within 12 years.

The RBI is expecting feedback until 31 October this year. Final rules shall be released following amendments to the Banking Regulation Act.

View the draft guidelines here.