RBI to expedite new bank licence process: Chakrabarty

The Reserve Bank of India will expedite the process of issuing final guidelines regarding the entry of new entities in the banking sector after the Lok Sabha’s passage of the Banking Laws (Amendment) Bill.

The amendments give more power to the central bank, such as superseding bank boards, and allows it to inspect banks’ associates and subsidiaries. RBI had made it a precondition to get these powers before it allowed new entrants.

“Time we cannot say but the process will be expedited... I don’t think it should take much time,” said RBI deputy governor K C Chakrabarty, on the sidelines of an event.

Following the budget announcement by Pranab Mukherjee, former finance minister and now the country’s president, in 2010-11 that companies and business houses would be allowed to apply for setting up new banks, RBI started the process of framing guidelines.

It issued a discussion paper in August 2010. A year later, it issued the draft guidelines. In July this year, it released the gist of the comments it had got on the draft norms.

When asked whether RBI was comfortable giving bank licences to companies, Chakrabarty said it was difficult to say anything at the moment, as the final guidelines first needed to be issues.

The draft norms had said applications of both non-bank finance houses and business houses would be considered, while entities in real estate would not.

RBI is also expected to set up a committee to vet the applications of interested parties. NBFCs such as L&T Finance, Shriram Transport and Reliance Capital had expressed interest.

In the draft norms, RBI had suggested an initial minimum capital of Rs 500 crore, while the aggregate non-resident shareholding in a new bank was to be capped at 49 per cent for the first five years.