New bank licences: NBFCs may get priority

RBI deputy governor says there is separate panel that will screen applications put in by aspirants

For securing banking licences, non-banking financial companies (NBFCs) had an advantage over other applicants, in already having a good customer base, Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty said on Wednesday.

“NBFCs have an advantage — they have a customer base. If they get a licence, they can convert themselves into banks,” he said. “But how it would be done, what are the other factors, I don’t know…because a separate committee has been appointed (to award licences),” he added.

Last week RBI Governor Raghuram Rajan had named former RBI deputy governor Usha Thorat, former Securities and Exchange Board of India chairman C B Bhave and the apex bank’s central board member Nachiket Mor members of the external committee for screening the list of applicants. The panel is headed by former RBI chief Bimal Jalan.

In July, RBI had said it received 26 applications for new licences, including from Tata Sons, IDFC and LIC Housing Finance.

Following Chakrabarty’s comments, IDFC shares extended their gain, closing 3.14 per cent higher on the BSE.

Chakrabarty also said RBI did not have any problem with banks offering loans to credit card holders. while purchasing goods or services but there needs to be transparency with the process.

“There is no ban on giving loans on credit cards. Don’t charge 12 per cent actually and claim that I am charging only zero per cent interest,” he said.

RBI had last month banned zero per cent interest schemes offered by various bank to credit card holders, saying these lacks transparency. The move is likely to dent banks’ festive season sales.

“We are not saying you give a loan and say no EMI has to be paid... The only thing is whatever the EMI has to be paid, transparently say what is the interest rate you are charging,” Charkrabarty said. He said the timing of the ban on zero per cent interest schemes was perfect, as during festive seasons mis-selling is at peak.

When asked whether credit offtake will pick up since some banks have reduced lending rates on select products, Chakrabarty said banks were already giving too much of loans. “It is not our concern; the bank must be able to mobilise the resources,” he said. “Our concern is that banks are not able to mobilise deposits, but they are giving more loans. So, how they will do that, that’s what we are worried (about),” Chakrabarty said, adding the credit to deposit ratio (CDR) is 78 per cent and the incremental CDR is more than 80 per cent.

“We have no problem if banks can give as much as loan they can to whatever sector they feel is important. In our view, credit is necessary for productive purposes. Small and medium enterprises and agriculture require more credit,” Chakrabarty added.