RBI queries applicants, regulators on new bank licences

Central bank conducting preliminary screening process for 26 entities that have submitted their applications

Gearing up to issue new bank licences, RBI has shot off detailed queries to over two dozen applicants and various regulators in India and abroad as part of its due-diligence on those seeking to enter banking arena.

The Reserve Bank of India (RBI) is in the process of granting new bank licences for the first time in about a decade and preliminary screening process in underway for 26 entities that have submitted their applications.

As part of this process, RBI has asked many applicants to provide further details about their promoters, equity structure, financial inclusion programme, proposed banking model, among others, sources said.

RBI is also seeking details from other regulators, including capital markets watchdog Sebi and insurance regulator IRDA, about the businesses of the applicant entities under their respective jurisdictions, they added.

With regard to some applicants, RBI has also sought to know details about source of funds and compliance to the structural norms proposed for new banking players.

Besides, RBI is seeking additional details from the concerned foreign regulators about those applicants whose group entities have operations, significant business dealings with foreign companies or overseas listings.

Sources said this due diligence process, which RBI expects to complete by next month, involves information exchange with domestic and foreign regulatory authorities for all group entities of the applicants.

After this preliminary screening process, an external expert panel would look into the bank licence applications.

Headed by former RBI Governor Bimal Jalan, this high-level committee also includes RBI's former Deputy Governor Usha Thorat, Sebi's former Chairman C B Bhave and financial sector expert Nachiket Mor.

RBI's board will take a final call on new bank licences after taking into account the recommendations made by this panel, while the central bank expects to finalise the names of successful entities by January 2014.

The 26 applicants include entities from large corporate houses like Tatas, Anil Ambani-led Reliance Group, Kumar Mangalam Birla-headed Aditya Birla Group, L&T, Bajaj, SREI and Religare groups.

Besides, Department of Post, IFCI, LIC Housing Finance, JM Financial, Muthoot Finance, Bandhan Financial, Edelweiss, IDFC, Indiabulls Housing Finance, India Infoline, Janalakshmi Financial Services, Magma Fincorp, Shriram Capital, UAE Exchange and TFCI are also in fray.

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