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Thursday, April 19, 2018

RBI likely to give banking licences ‘on tap’ basis

In August last year, the central bank had also floated a discussion paper suggested that award of new bank licences should be a continuous process with “stringent entry norms”.

New Delhi | Published: January 27, 2014 3:12:17 am
The much-awaited new bank permits may be awarded to each category of applicants, following which such licences could be handed out “on tap” basis. The much-awaited new bank permits may be awarded to each category of applicants, following which such licences could be handed out “on tap” basis.

The much-awaited new bank permits may be awarded to each category of applicants, following which such licences could be handed out “on tap” basis.

“There is a thinking that at least three new bank licences would be given out — one to a corporate house, second to a non-banking financial company and a third one to a microfinance company. But the final call is with the Reserve Bank of India that is still screening applicants and doing all possible due diligence,” said a person familiar with the development.

In August last year, the central bank had also floated a discussion paper suggested that award of new bank licences should be a continuous process with “stringent entry norms”.

As many as 26 companies had applied for new bank permits last year, including a mix of public sector entities such as India Post and IFCI, along with private sector conglomerates like Reliance Capital and NBFCs and microfinance companies.

Since then, two of the applicants — Tata Sons Ltd and Value Industries that is affiliated to Videocon Industries Ltd — have withdrawn their applications.

Among corporate houses, Anil Ambani-led Reliance Capital and Aditya Birla Nuvo Ltd are the two main contenders for bank licences.

Meanwhile, Janalakshmi Financial Services, a microfinance company and Shriram Capital — an NBFC — are also being seen as front runners.

However, award of bank permits is likely to be completed only later this year, the person said, adding it could take place in the second quarter. The Bimal Jalan committee on new bank licences is scheduled to meet on February 10 to screen applicants.

However, Jalan, a former RBI governor, had last month said that the committee would require at least three months to finalise its report, indicating that licence would not be issued in January 2014.

The other members of the committee are: former RBI Deputy Governor Usha Thorat, former Sebi chief CB Bhave, and Nachiket M Mor, Director of the Central Board of Directors of RBI.

Over the last two decades, the Reserve Bank of India has awarded bank permits to 12 entities in two rounds. Ten bank licences were handed out based out guidelines issued in 1993, following which two more bank permits were given in 2003-04.

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