FM wants RBI to start working on licences to new banks

Asks apex bank to finalise norms for granting licenses, accept applications from interested parties

Finance Minister P Chidambaram has asked the RBI to start working on issuing final guidelines for granting licenses to new banks and receiving applications from the interested entities "in anticipation of Banking Regulation Act (BRA) being amended".

"There is a roadmap and we have written to RBI recently urging them to proceed to finalise the guidelines and proceed to receive applications for new bank licenses in anticipation of banking regulation act being amended," Chidambaram told reporters after reviewing various aspects of public sector banks with their heads.

Chidambaram said the powers or authority that RBI wants are already available in other provisions of law and in RBI's own regulations and guidelines.

"We are only formalising them by amending Banking Regulation Act. And I have reassured the RBI that BRA will indeed be amended, hopefully in the winter session, if not in the winter session, (then) in the budget session," he said.

He said RBI does not need these extra-ordinary powers the next day it issues the banking license and even issuance of the license would take another six to eight months.

"The RBI proceeds to receive applications and process them, the first banking lincense is not likely to be issued for another six or eight months. And then the first occasion to exercise those extra ordinary powers will not arise the next day it will arise much later," he said.

"So, by the time the license is issued and the bank comes into existence, and the bank begins to function, the Act would be amended," Chidambaram said. "The powers are already there. "

"So, we have written to the RBI and we hope that the RBI will pick up the thread and finalise the guidelines and start receiving applications and considering them. It will still take six to eight months," he added.