RBI seeks lenders' feedback on banking licence seekers

The Reserve Bank of India (RBI) has sought feedback from lenders on companies that have applied for a banking licence regarding their track record in servicing loans and end-use of funds.

After RBI released final norms for new licences in February 26 companies ranging from business conglomerates to micro lenders had applied. New bank licences are being awarded after more than a decade.

Before a high-level advisory committee, headed by former central bank governor Bimal Jalan, takes a final call, the applications are being screened by RBI to find out whether they comply with the ‘fit and proper’ criteria.

LONG ROAD

• 1993: First set of guidelines on new banking licences issued; nine new entities allowed to set up banks
• Dec 2012: The Lok Sabha passes Banking Laws (Amendment) Bill; move paves way for RBI to issue final guidelines
• Feb 2013: Final norms issued
• July 1, 2013: Deadline for filing applications for new banking licences

For the initial screening, the banking regulator has sought additional information from the aspirants, which includes additional balance sheet, source of funding, possible investors and their source of funding, among others.

“They have asked for a report on how these applicants are in terms of dealing with their lenders, repaying their loans and, in general, the opinion we hold about these applicants when it comes to day-to-day dealings with us,” said the chairman and managing director of a public sector bank.

The Muthoot group, which is also seeking a banking licence, told Business Standard recently that in their case, further scrutiny is being done by the regulator. “Just like any other applicant, we have been asked for further details on things we have presented. Instead of two years’ balance sheet, they want to see the last five years’. They have also asked some of our bankers for  their views about us,” the group's managing director, George Alexander Muthoot, had said. There are banks which have lent money to the group based on the performance of their accounts, he added.

Finance Minister P Chidambaram said on Friday he hoped the new banking licences, expected to be given in January, would be issued to applicants with innovative and different banking models.

“I sincerely hope that when the new banking licences are given in January 2014, some licences would at least go to the people who have come up with innovative and different models of banking addressed to meet the needs of specific segments of people. It would be a pity if the new licences also go to banks which clone existing banks. I am confident that will not happen and innovative ideas and innovative banking will gain recognition by the licensing authority,” Chidambaram had said.