RBI should grant bank licences to domestic firms: Assocham

The Reserve Bank of India (RBI) should give new banking licences to domestic corporates in order to achieve the government's objective of financial inclusion, said industry body Assocham.

"The proposal for issuance of new bank licences as mooted in the Finance Act, 2010-11 is timely and can well serve development objectives of the government," Assocham said in a statement today.

RBI is expected to come out with discussion paper on the new banking licence soon.

Assocham said, however, the experience shows that promises made by companies at the time of issuance of licence and subsequent compliance are often at variance and RBI has little authority to take corrective action, especially in a de-regulated environment.

Finance Minister Pranab Mukherjee in the budget had announced that RBI may issue fresh banking licences to private sector players and non-banking finance companies (NBFCs).

Under the current guidelines, a new private sector bank should have a minimum networth of Rs 300 crore and no single entity or group of related entities can hold more than 10 per cent in a bank.

The apex body asked the central bank to be vigilant before granting licences as its cancellation under the current legal framework is often an 'impractical proposition', the Assocham said.

Business houses including Religare, AV Birla group, Anil Ambani group and Bajaj Auto have evinced interest in acquiring a banking licence. NBFCs like Shriram Group and Srei are keen on getting a banking licence.