The Reserve Bank of India has bought time before deciding on the award of bank licences before the general elections. RBI governor Raghuram Rajan said, “I have to get a formal approval from the Election Commission (EC) … My sense is, if all goes well, we should be able to do it in a few weeks.”
Rajan’s comments on Friday after the board meeting of the central bank comes just days after finance minister P Chidambaram had said the model code of conduct will not be any hinderance for the issue of bank licences.
“Code of conduct has nothing to do with the normal functioning of the government. The indication we have got from the RBI is that they wish to issue a few licences soon,” the minister had told reporters after meeting the chiefs of state-owned banks on Wednesday.
Finance ministry officials had pointed out that Rajan would address the press after the meeting of the central board of directors on Friday as an indication that a list was in the offing. They had claimed that since the process of handing out bank licences was started last year, it is not a new announcement and would pass muster with the EC.
But emerging after the meeting where Chidambaram, too, was present, Rajan made his position clear. Though Rajan had initially indicated that the new permits would be issued by early 2014, it was just last month that the high-level panel, led by former RBI governor Bimal Jalan, had submitted its report after scrutinising and shortlisting names of applicants.
Chidambaram said he had not seen the Jalan committee report. “I have not seen the report. If, at some stage, the governor wishes to share its content with me, then I will be very happy to listen. But I don’t intend to speak on it,” he said.
It is understood that corporate groups have been cleared for new bank licences by the Jalan committee. The basic test, the committee has used, is to ensure that the shareholding in a group is diversified, said a source in the RBI. “We have not had any reason to believe that a group with corporate parentage can’t run a bank since there are plenty of safeguards provided in the current banking rules,” said the source.
The committee had submitted its recommendations last week to an RBI panel comprising former deputy governor Anand Sinha for the final round of due diligence.
Once it is over, the proposal would be sent to a committee of the central board for a final decision. The RBI has retained the services of Sinha as officer on special duty to oversee the process of issue of the licences, even though his extended term as deputy governor concluded in January this year.