Big players unlikely in the first phase

The chances of any big corporate house getting new banking licence in the first round of the process, set to begin with the issuance of guidelines by the end of this month, is bleak.

A senior finance ministry official associated with the process told Business Standard the government, in its response to the Reserve Bank of India (RBI), had suggested precautions to ensure a non-controversial start. Indicating that no big corporate house was expected in the first set of applicants expected to get the go-ahead for opening new banks, the official said: “The government is not in favour of taking up politically sensitive cases in the initial phase”.

He added RBI guidelines for new licences would be out by this month-end and the process would start with that. The ministry has proposed adequate checks and balances to be put in the final guidelines to ensure that new licences are kept out of any controversy, said the official. The passage of the Banking Laws Amendment Bill in December paved the way for RBI to finalise the guidelines as early as possible and invite applications.

According to RBI's draft guidelines released in August 2011, private sector entities or groups owned and controlled by Indian promoters, with diversified ownership, sound credentials and integrity would be eligible to promote banks.

They should also be having successful track record of at least 10 years.