Poll panel may give conditional clearance for bank licences today

Could ask RBI to tell prospective licensees not to advertise in newspapers or make political donations

The Election Commission (EC) is likely to give a conditional clearance to the Reserve Bank of India's (RBI's) proposal to issue fresh bank licences. A final decision on this is expected to be taken on Wednesday.

The three-member EC, headed by Chief Election Commissioner V S Sampath, on Tuesday held a meeting to discuss the additional information it had sought from RBI last week. The poll panel had raised a red flag on timing of the proposal, fearing the issue of licences might help the ruling parties in the Lok Sabha elections, which begin on April 7 and conclude on May 12.

"Today's meeting was inconclusive. The commission discussed the issue at length but could not arrive at a decision. Tomorrow (Wednesday), there will be a fresh meeting and a decision is expected," said a high-ranking official, who refused to be named because of the sensitivity of the matter.

"The commission is thinking on two lines - to either defer the decision or give it a clearance with certain conditions. The second option is likely to find favour with the three commissioners," the official added.

If EC clears the proposal, it might ask RBI to put certain conditions for the prospective licensees. These could be asking them not to advertise in newspapers and prohibiting them from making donations to political parties.

EC had last week asked RBI if the Union finance ministry was consulted before arriving at a decision and moving the proposal before it.

To this, the answer from RBI was in the negative.

REACHING CLOSURE?

• Feb 26, 2010: Then finance minister (now President) Pranab Mukherjee announces in his Budget 2010-11 speech that firms and business houses will be allowed to set up new banks
• Aug 11, 2010: RBI releases discussion paper on entry of new banks in the private sector
• Aug 29, 2011: RBI releases draft guidelines for licensing of new banks in the private sector
• Feb 22, 2013: RBI releases guidelines for licensing of new banks
• July 1, 2013: RBI releases names of 26 applicants; two of them drop out later, one is added
• Sep 4, 2013: RBI Governor Raghuram Rajan announces setting up the Bimal Jalan committee to screen applications
• Feb 2, 2014: Bimal Jalan committee gives its recommendations; drops tainted entities from contention
• Mar 8: says a few bank licences will be issued within weeks of the Election Commission’s approval
• Mar 20: EC raises questions on timing of RBI’s proposal to issue new licences; seeks clarifications
• Mar 26: EC to hold a meeting to discuss the issue and take a call on whether to defer a decision or give a conditional clearance to the proposal

After the model code of conduct kicks in, it becomes mandatory that EC's permission be taken before announcing any major policy decision. RBI had moved the commission after dates for the polls were announced on March 5.

Earlier, another top-ranking official, who too had declined to be named, said the proposal should ideally get clearance, since it was moved by RBI, and not the Union government.

An expert committee under former RBI governor Bimal Jalan, after scrutinising the 25 applications for new bank licences on the fit-and-proper ctiterion, had given its final recommendations to RBI towards the end of last month.