No clearcut public opinion on new banking license norms: RBI

Reserve Bank of India (RBI) Governor D Subbarao today said the central bank was unable to discern a "clearcut" public opinion on the proposed norms for issuance of new banking licences, as divergent feedback was received on a discussion paper put up in the public domain.

"We found, not surprisingly, that that there is no clear cut public opinion on new bank licensing issues," Subbarao told reporters after a meeting of the RBI's Central Board here. He said the gist of the feedback would be put up on the RBI website in ten days' time.

The RBI had sought stakeholders' views on issues related to the initial capital of new banks given licences, the way promoters' capital would be diluted, whether corporates should be allowed to set up banks, whether non-banking finance companies (NBFCs) should be converted into banks and the business models for the new entrants.

"Some said that corporates should not be allowed for standard reasons, some said they should be allowed as times have changed," he said.

Similarly, there was a broad spectrum of opinion on the issue of initial capital and dilution of capital, he said.

"There is no clear cut opinion on each of these issues," he said.

"We will study the feedback we have got and then come up with draft guidelines by the end of January, 2011, after further examination of all the issues," Subbarao said.

Subbarao said the Malegam committee constituted by the RBI to examine issues related to micro-finance institutions (MFIs) were also discussed by the Central Board.

He said that Y H Malegam, who is also a board member of the RBI, had indicated the report might be submitted ahead of the target deadline of end-January, 2011.

As an interim measure, he said the RBI would convene a meeting of banks to understand their concerns about the MFIs.

Subbarao said the RBI would also examine whether anything more needed to be done to keep the struggling MFI industry afloat.

Meanwhile, he said that the Malegam committee is actively working on the report and would be visiting Andhra Pradesh next week, meet the chief minister and other stakeholders there as well as in other parts of the country.