Issuing bank licences has nothing to do with politics: RBI

Raghuram Rajan says bank licences is an economic and regulatory process and is to be seen as distant and different from politics

The granting of new bank licences has no link with politics and the process is purely economic and regulatory, Reserve Bank of India Governor Raghuram Rajan said Tuesday.

"This (issue of bank licence) is not in any way a political process, it is an economic and regulatory process and is to be seen as distant and different (from politics)," Rajan told media persons here after announcing the RBI's monetary policy.

"So, while different political parties may have their views, we have to undertake what we have to undertake," he added regarding the bank's internal processing of licence applications.

Explaining that the requirements of due diligence and feedback from investigating agencies had taken more time than expected, Rajan said these reports had been received only by Feb 25, wherevy the entire process had spilt over into the election season.

The RBI has sought the Election Commission's nod over the issue of grant of new bank licence as a matter of caution on not violating the poll code of conduct, which came into force with the March 5 announcement of general election.

The EC's meeting on the issue, scheduled Monday, was postponed, thus preventing the central bank from announcing anything in the matter.

The RBI received 27 applications, which include from public sector units India Post and IFCI, and from the private sector Anil Ambani and Aditya Birla groups, Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital.

In the past 20 years, the RBI has licensed 12 banks in the private sector in two phases, last two entities being Kotak Mahindra Bank and Yes Bank in 2003-04.