Assocham favours 10 new banks initially

Entities fulfilling stringent benchmarks should be permitted to open new banks, but the number should be restricted to 10-12 initially, industry chamber Assocham has proposed to the Reserve Bank.

In a note submitted to the RBI, the chamber has further suggested that well-run large NBFCs should be considered for new bank licence if they fulfil other conditions.

"Considering the uncertainties/volatilities associated with current business environment, RBI may consider giving out licences in a staggered manner to few players in a specific time frame. It could be a process, and not an event," the chamber said in a note to RBI.

However, it said, the cutoff date for acceptance of applications must be in place for eligibility.

The applications should be accepted through e-mode and kept in the public domain for larger scrutiny and they should not be accepted after a cut-off time and date, it said, adding that the details of assets and liabilities of promoters must form a part of the applications and put up on their websites.

Selection of new entrants or due-diligence should include a thorough evaluation on the viability and sustainability of their inclusion model, it added.

It also stated that new banks need regulatory forbearance to create a level playing mode.

The requirements of 25% branches in rural areas, 40% advances to priority sector and the like should be relaxed so that the economic viability does not suffer in the initial stages.

This is an area which needs extensive discussions so as to isolate any bias and unhealthy issues, it said.