FinMin trying to ease RBI fears on new bank permits

The RBI is not in favour of giving out licences without amending the law suitably

The finance ministry is exploring options to speed up the process of issuing new bank licences, though the Banking Laws (Amendment) Bill is yet to be passed by Parliament.

The Reserve Bank of India (RBI) is not in favour of giving out licences without amending the law suitably. Officials said the finance ministry was trying to address the concerns of the regulator.

“We are looking at all measures that can expedite the process…. RBI’s concerns are genuine and we are looking at some arrangement to address those till the Bill is passed,” said an official.

Officials said the matter was being discussed with RBI. The regulator was expected to come out with guidelines in two to three months.

Many in the government, including Prime Minister’s Economic Advisory Council Chairman C Rangarajan, are of the view that new licences can be issued according to current banking regulations and the law could be modified in due course.

Industrial houses such as Larsen & Toubro, Reliance Anil Dhirubhai Ambani Group, Aditya Birla Group and Shriram Group had expressed interest in setting up banks.

In April, a Bill proposing raising voting rights of stakeholders in private banks to 26 per cent from 10 per cent was approved by the Cabinet and tabled in Parliament.

Currently, the banking space is mainly dominated by state-run State Bank of India and private lenders such as ICICI Bank and HDFC Bank. Industrial houses such as Larsen & Toubro, Reliance Anil Dhirubhai Ambani Group, Aditya Birla Group and Shriram Group had expressed interest in setting up banks.

In the 2010-11 Budget, then Finance Minister Pranab Mukherjee had first announced that new banking licences would be issued to private sector players and non-banking finance companies to extend geographic coverage of banks and improve access to banking services.