Banking licence draft guideline by March-end: Finmin

The Reserve Bank will announce draft guidelines for giving new banking licences in the next few days, the Finance Ministry today said.

"RBI will come up with the guidelines by the end of this month," Department of Economic Affairs Secretary R Gopalan told reporters on the sidelines of a CII function.

He further said the Finance Ministry would have a look at the draft guidelines and comments would be invited before the final guidelines were notified.

In the Budget 2011-12, Finance Minister Pranab Mukherjee had said the RBI plans to issue guidelines for the grant of new banking licences before the close of this financial year.

In the last Budget, it was announced that the Reserve Bank of India would consider giving traditional banking licences to private sector players, he had said.

Following the announcement made by the Finance Minister, the Reserve Bank had brought out a discussion paper in August, 2010, on giving out new banking licenses to business houses and non-banking finance companies, besides regulations for the same to foster greater competition.

The RBI also sought to know "whether industrial and business houses could be allowed to promote banks." Furthermore, it sought stakeholders' views on whether NBFCs should be allowed to convert into or promote banks.

The RBI has received comments on its discussion paper from all stakeholders.

Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be mulling an entry into the banking space.

At present, India has 26 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.