'Draft guidelines on new banking licences in 15-20 days'

The Finance Ministry today said it is holding consultations with the RBI and will approve the draft guidelines for granting new banking licences within 15 to 20 days.

The Finance Ministry and RBI officials are discussing the draft guidelines on a "day-to-day" basis, Financial Services Secretary Shashikant Sharma said.

"Very soon, we will have a final discussion (with the Finance Minister on the draft) and then we can go ahead and give a green signal to it," he said.

When asked by when the RBI will release the draft guidelines, Sharma said, "in the next 15-20 days".

Comments of stakeholders will be invited on the draft before the final guidelines are notified.

In the Budget 2011-12, Mukherjee had said the RBI plans to issue guidelines for the grant of new banking licences by March 31, 2011.

Meanwhile, sources said the Finance Ministry may finalise the guidelines even before proposed amendments to banking laws aimed at giving more powers to the RBI come into effect.

The Banking Laws (Amendment) Bill, 2011, was introduced in the Lok Sabha during the Budget Session, which seeks to give voting rights to investors commensurate with their shareholding in the private sector banks.

The draft legislation also proposes giving powers to the RBI to supersede the Board of Directors of a banking company for a period of up to one year and appoint an administrator.

On the norms for mergers in the banking industry, no approval will be necessary from the Competition Commission of India, the anti-monopoly watchdog. Only RBI clearance is needed and the necessary amendments have been incorporated in the Bill.

Earlier, in August, 2010, the apex bank had brought out a discussion paper on giving new banking licenses to business houses and non-banking finance companies, besides regulations for the same to foster competition.

The RBI also sought to know "whether industrial and business houses could be allowed to promote banks."

Various entities like Reliance Capital, India Bulls, Religare, IFCI and Aditya Birla Financial Services are said to be mulling an entry into the banking space.

India presently has 26 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, four local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.