Draft guidelines on new banking licences by month-end

The finance ministry today said the draft guidelines on new banking licence with provisions to allow entry of corporates would be finalised by month-end.

The draft guidelines should be finalised by the end of this month, Financial Services Secretary SK Sharma told reporters on the sidelines of Ficci National Conference on Insurance.

"This was to be (released by) March 31, but we are taking some more time because there are some issues we are still considering," he said.

Asked if the draft guidelines would have any mention of industrial houses, he said, "it would be general...It will not be ruled out (corporate houses getting banking licence) also. RBI will have decision as per the guideline."

In the Union Budget for FY11, it was announced that the Reserve Bank of India would consider giving traditional banking licenses to private sector players.

Following the announcement made by the Finance Minister Pranab Mukherjee, the Reserve Bank had brought out a discussion paper in August, 2010, on giving out new banking licences to business houses and non-banking finance companies, besides regulations for the same to foster greater competition.

On new LIC Chairman issue, Sharma said, the government has taken no decision.

However, there were reports that DK Malhotra, the existing Managing Director of LIC, is going to replace Chairman TS Vijayan who will be completing his five year term in May 2011. Vijayan (58) still has 2 years of residual service.

Extension of the term can be provided by the government. Earlier this month, Union Bank of India Chairman and Managing Director MV Nair was given extension of three months by the Appointment Committee of the Cabinet (ACC) headed by Prime Minister Manmohan Singh.

As per the existing government rule, a Chairman and Managing Director or a Director is appointed in the public sector entity for a period of five years or up to age of 60, whichever is earlier.