House committee red flags new bank licence norms

In fresh trouble for the government’s reform measures,a Parliamentary panel has questioned the Reserve Bank of India’s norms for new bank permits.

Written by ENS Economic Bureau | New Delhi | Published:September 29, 2013 12:50 am

In fresh trouble for the government’s reform measures,a Parliamentary panel has questioned the Reserve Bank of India’s norms for new bank permits.

The Parliamentary Standing Committee on Finance,which met on Friday,has opposed the Reserve Bank of India’s move to give new bank licences to corporate houses as well as its discretionary powers to apply the “fit and proper” eligibility criteria.

“The report has been finalised and we will be submitting it in a few days,” said BJP leader Yashwant Sinha,who chairs the committee.

The report could have a significant impact on the process of handing out bank licences that was started in February this year and is expected to be completed by early 2014.

A total of 26 applicants were received by the central bank,including those from the Tata group and firms controlled by Anil Ambani and Kumar Manglam Birla.

Asking the government to keep industry and banking separate,the panel has pointed out that bank licences are not given to corporates anywhere in the world and such a practice should not be allowed in India as well.

It has also recommended that the minimum capital requirement of Rs 500 crore should be doubled to Rs 1,000 crore as it would ensure sustainability of banks.

Speaking to The Indian Express,Sinha,who is also a former finance minister,said that the fit and proper norms are not clearly defined.

Sources said that some of the members pointed out that such discretionary powers could lead to a situation like the 2G spectrum auction scam where RBI would have a final call on allowing new entrants to the sector on undefined factors including a scrutiny by the CBI and income tax authorities.

The central bank said that under the “fit and proper” criteria,it would assess applicants based on factors including sound credentials and integrity; a successful track record of running a business for at least 10 years and could also seek feedback on applicants from enforcement agencies.

Significantly,the 30-member panel has seven members from the Congress Party,including Congress vice-president Rahul Gandhi. However,sources said that Gandhi was not present for the meeting.

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