RBI nod for five more LABs

MUMBAI, FEB 17: The Reserve Bank of India RBI has granted an in-principle' approval to five local area banks LABs in Punjab, Andhra ...

MUMBAI, FEB 17: The Reserve Bank of India RBI has granted an in-principle8217; approval to five local area banks LABs in Punjab, Andhra Pradesh, Tamil Nadu, Rajasthan and Gujarat to promote savings and enhance the institutional credit framework in rural and semi-urban areas.

This is the second tranche of LABs that have got Reserve Bank clearance to carry out rural banking business. In January and March 1997, the Reserve Bank gave in-principle approvals to three LABs: Manipal Lab, Priyadarshini Lab and Krishna Bhima Samruddhi Lab. These banks are yet to commence banking business.

In a release issued today the Reserve Bank said that it gave clearances to Capital Lab Nakodar, Punjab Coastal Lab Vijayawada, Andhra Pradesh, Lab of Kongunadu Salem, Tamil Nadu, Vinayak Lab Sikar, Rajasthan and Central Gujarat Lab Dabhoi, Gujarat. The clearance is subject to their complying to certain conditions, the RBI said in a statement.

The promoters of these LABs have taken steps to register with the Registrarof Companies RoC and were taking necessary initiatives to operationalise these banks by putting in place the required infrastructure, the central bank said, adding that after infrastructural and other requirements are completed, they would have to apply to the Reserve Bank for issue of licence to commence banking business.

The setting up of LABs was first mooted by the former finance minister, P Chidambaram, in his Union Budget. The reason for setting up these LABs was to improve credit delivery systems in rural areas and also work together with the regional rural banks RRBs to enhance the institutional credit framework.

In August 1996, the Reserve Bank announced guidelines for the entry of LAB in the private sector in which the apex bank had spelt out the capital requirements for the promoters, the capital to be maintained and the profile of their existing business. These LABs are to provide an institutional mechanism for promotion of rural savings as well as for the provision of credit for viableeconomic activities in the local areas.