RBI to come out with paper on banking structure: Subbarao

RBI will come out with a paper on the banking structure in the country discussing issues like consolidation even as it prepares to issue new bank licences after a decade.

 

RBI will also involve enforcement agencies and tax authorities before it issues new bank licences to corporate entities for which applications can be made till July 1.

 

"My take on that will be told very clearly when the RBI comes out with the paper. It's a paper about the banking structure for India. We are going to bring it out in the next one month where we will address these issues or at least define the issues for discussion," RBI Governor D Subbarao told PTI in an interview.

 

He was replying to a question about Finance Minister P Chidambaram talking about consolidation of banks at a time when new bank licences are on the anvil.

 

Subbarao said the Narasimham Committee on banking sector, which went into this issue, had said that India must have some large banks at the global level, competitive and comparable with global banks.

 

The panel also said the country must have some mid-sized banks and some small-sized banks which can penetrate more.

 

"We have discussed this issue and as we licence more banks we believe that it will add to the competitiveness of a number of banks," he said.

 

The discussion paper, sources said, would also cover issues like need for investment banks, policy on presence of foreign banks, conversion of urban cooperative banks into commercial banks, and periodicity of licensing new banks, whether in blocks or on tap. 

 

Asked if the RBI has any number in mind for issuing new licences, the RBI Governor said: "There is no number in mind.

 

"I cannot commit on the number at this time. But to believe that if you have 86 banks in the country today, we would give another 86 licences, is too far fetched.

 

"And after all, running this process, if we end up giving 2 or 3 licences, it will be a vacuous process. So we got to strike the right balance...Both unwilling and unable to comment a number now."

 

To a question whether there could be an extension of last date for receiving applications, he said, "No, no". The guidelines have been there for the last two months and the clarifications have come.

 

"I don't think any serious potential applicant is sitting idle now. And you know people will wait till last date to apply. I think they will keep their application ready. We are expecting that most people will apply in the last week because there is nothing to be gained by applying early and we are not giving any additional mark for date of application", he said.

 

On how RBI will judge who among the applicants are 'fit and proper', he said, there were no hard criteria laid down for fit and proper.

 

"We will of course get reports from the enforcement agencies and tax authorities etc. And we got to make the judgement on whether any comment or adverse report is material to the applications", Governor said. 

 

Subbarao said the RBI will apply its mind to these issues depending on the response it gets from enforcement agencies and tax authorities.

 

"Our effort will be to make that judgement as transparent as objective as contestable as possible. Realising fully however that there is inevitably a subject of element in evaluating a fit and proper criteria.

 

"Also I want to say that not everybody who is fit and proper will be given a licence because we expect the number of eligible applicants will be much larger than what is a meaningful number of licences we can give", he said.

 

To a question he said, the new licences were unlikely to be issued before he demits office in September.

 

The RBI had issued guidelines for licensing of new banks in the private sector on February 22, 2013 and subsequently came out with clarifications on the issues raised by potential applicants.

 

Many large business groups such as Anil Ambani-led Reliance Group, L&T, Mahindras, Birlas, Religare and Videocon have already made public their intentions to apply for the licences, while many NBFCs including Shriram Group, Indiabulls, India Infoline, IFCI and PFC have also shown interest.

 

Those reported to be interested in banking licence also include Tatas and Mukesh Ambani-led RIL group.