Passage of banking law welcomed

Welcoming passage in the Lok Sabha of the Bill amending the banking laws, financial sector entities said it would pave the way for Reserve Bank of India to release the final norms for giving licenses to start new banks. The grant of power to supersede the boards of private sector banks would strengthen the banking regulator, they noted.

RBI has issued draft norms for establishing new banks. The sector expects final norms to be out soon, said senior executives with non-banking finance companies.

Rashesh Shah, chairman and chief executive, Edelweiss, the financial services outfit, said this was one more in a series of reforms investors would welcome. For its size, India was among the least banked economies in the world. It needs at least 200 small banks for greater inclusion and economic growth, he said. Asked about his own company’s interest in applying, he said it was too early to talk details. Many groups and entities would apply, he said, depending on RBI’s finalised policy.

The Aditya Birla Financial Services Group said: “Banking is a natural extension to our presence as a significant non-bank, with over 1,700 points of presence and an assets under management base of over Rs 100,000 crore.”

The Federation of Indian Chambers of Commerce and Industry welcomed passage of the banking Bill and said this would lay the foundation for many reforms in the sector. It also said it would encourage foreign investment in the sector.

Ficci President Naina Lal Kidwai said: “Ficci hopes that all other enabling factors, as prescribed by RBI (the Reserve Bank), are soon fulfilled so that new bank licences may be issued to the private sector. This will help expand the reach of banking services to the financially excluded. New bank licences will also provide an excellent impetus to the Centre’s and RBI’s financial inclusion agenda.”

The Confederation of Indian Industry said this would pave the way for RBI to approve new banks in the private sector and also attract investments.