RBI corrects own mistake but doesn't pardon Videocon's

Confusion galore over new bank licences: One applicant makes entry after 3 months, another seeks to withdraw its withdrawal letter

It’s not often the Reserve Bank of India (RBI) publicly acknowledges a mistake, even an inadvertent one. However, on Friday, a press statement from the central bank on the highly sensitive issue of new bank licences said it had inadvertently left out the name of an applicant, K C Land & Finance Ltd, from the list of companies that had applied for bank licences.

On July 1, the central bank had released a list of 26 bank licence aspirants.

In the same press statement, RBI said Aurangabad-based Value Industries had withdrawn its application. Value Industries, part of the Videocon Group, as well as its chief Venugopal Dhoot, immediately denied they had withdrawn from the race.

Sources familiar with the developments say there was a lot of confusion within the Videocon Group, as the officials handling the licensing issue were under the impression the group had given another application in the name of Videocon and RBI was considering that as the main application. Therefore, the officials decided to fax a letter to RBI, requesting withdrawal of the Value Industries application. Later, when the group officials realised Videocon hadn’t applied separately, it wrote to the banking regulator, requesting Value Industries’ application be reconsidered.

However, the banking regulator was in no mood to entertain the request.

Venugopal Dhoot, promoter of Value Industries and chairman of Videocon Industries, told Business Standard, “There was some miscommunication between us and RBI. We are hoping to sort this out in the next few days. We have not withdrawn the application and have only sought clarifications from RBI on certain issues.”

On Chandigarh-based KC Land & Finance, RBI admitted the application concerned was received at its central office, Mumbai, on July 1, “but was inadvertently not included in the list of applicants for new bank licences in the private sector”. Now, it was “being included in the list”. KC Land & Finance is involved in the real estate and hospitality sectors.

Prospective applicants have questioned why RBI took about three months to ascertain it had missed the name of an applicant. The process of granting fresh licences was initiated about three years ago and the central bank had issued the final guidelines in February this year. Banking aspirants were given time till July 1 to submit applications.

Last week, new RBI Governor Raghuram Rajan said he expected to grant fresh licences in January 2014. He added an external committee under the chairmanship of former RBI governor Bimal Jalan would be formed to vet the applications.