RBI fast-tracks bank licensing process

The government and the Reserve Bank of India (RBI) are trying to issue the first of the new bank licences by March 31, despite the likely general election in April-May.

The process of selecting entities has been put on a fast track, with the screening panel headed by former RBI Governor Bimal Jalan taking all applications for scrutiny at its third meeting on Tuesday.

"The panel reviewed all the applications and has asked RBI for additional details. The process will be over in the current financial year and bank licences would be announced by March 31," said a government official, who did not wish to be identified.

For continuity at RBI headquarters when the successful applicants are finalised, the government is likely to appoint Deputy Governor Anand Sinha as officer on special duty in the central bank till at least March 31.

As many as 26 applications were given for setting up new banks, of which two were later withdrawn, from Tata Sons and Videocon Industries' subsidiary, Value Industries.

And, one more, from KC Land & Finance, was added.

The panel had reviewed about a dozen applications in its second meeting on December 16 and took up the rest in its meeting this Tuesday.

The committee will have another two of meetings to eliminate applicants which do not meet the fit and proper criteria for getting a licence.

Sinha, involved in drafting the guidelines for new licences, is to retire on January 18, after completing a three-year term with RBI as Deputy Governor, including a year's extension.

The name of Sinha's successor is also likely to be announced soon. A four-member panel headed by Governor Raghuram Rajan has already interviewed all executive directors of RBI and the recommendation sent to the Appointments Committee of the Cabinet, which the Prime Minister heads.

In September last year, Rajan had said he wanted to complete the process of selecting the new licensees during Sinha's tenure. However, with Jalan in December saying the committee would finalise its reports three months after scrutiny of applications by RBI, doubts had risen on whether these could be issued this year, particularly when the government is going for polls.

Now, the government and RBI are looking at a March deadline. The official said it has not been decided how many licences would be given in the first phase.

LIC Housing Finance, Aditya Birla Nuvo, the Department of Posts, Reliance Capital, Bajaj Finserv, Bandhan Financial Services, Edelweiss Financial Services, IDFC, IFCI, Indiabulls Housing Finance, India Infoline, INMACS Management Services, Janalakshmi Financial Services, JM Financial, L&T Finance Holdings, Magma Fincorp, Muthoot Finance, Religare Enterprises, Shriram Capital, Smart Global Ventures, SREI Infrastructure Finance, Suryamani Financing Company, Tourism Finance Corporation of India and UAE Exchange & Financial Services have applied.

In the past 20 years, RBI has given licences for 12 new banks in the private sector, in two phases.