Final banking licence guidelines soon: RBI Deputy Governor

The guidelines would pave the way for corporate houses to enter the banking sector

The Reserve Bank is likely to come out with the final guidelines for new bank licences much before the end of the fiscal as its consultation process with the Finance Ministry is over, Deputy Governor Anand Sinha said here today.

"We are in the process of issuing the licence guidelines. We should issue them soon...The consultation process with the Finance Ministry is over; everything is settled now, and we will be issuing the guidelines. (It will be) much before the end of this financial year," Sinha told reporters on the sidelines of an event here.

Referring to allowing corporates to open banks, he said he could not go beyond the draft guidelines.

"I cannot go beyond the draft guidelines because what will be in the final norms, we can't reveal. In the draft guidelines, we have certainly made corporates eligible," he said.

In a TV interview last month, Finance Minister P Chidambaram said no eligible corporate entity should be denied opportunity to enter the banking space.

"But if the guidelines are made out and transparently spelt out and if a corporate satisfies those guidelines, I don't see any reason why a corporate should not be given a licence," he had said.

Sinha today refused to quantify the possible number of licences, saying the central bank will be selective in this process. Currently there are 26 public sector banks, 22 private sector banks and over 40 foreign banks.

"We have said clearly in our draft guidelines (that) it will be a selective process naturally, because banks are very important for the financial sector and people have to meet all the criteria ... We don't put a number around that, that will depend on the quality of applications. (It is) very difficult to say anything more at this stage," Sinha said.

Replying to a question whether the RBI will allow real estate companies or brokerage firms to enter the banking fray, Sinha said, "wait for the final guidelines."

In the draft guidelines issued in August 2011, the central bank had said firms with an exposure of 10 per cent or more to real estate and brokerage businesses by revenue or assets would not be eligible for applying for licence.

Referring to the process after issuing final guidelines, Sinha said it would take some time to set up a new bank.

"Once the final guidelines are out, whosoever is eligible will be given time to apply. Then there will be internal evaluation of the applications. We have also said very clearly in our draft guidelines that there will be an external committee which will evaluate the applications. After all these processes, we will give an in-principle licence and we will give them a year to set up banks," he said.