RBI to meet industry bodies on new banking licences tomorrow

The Reserve Bank of India (RBI) is holding a meeting with industry chambers, including Indian Banks' Association (IBA) and CII, tomorrow in Mumbai to discuss modalities for granting new banking licences to business houses and non-banking finance companies.

There is meeting of bankers with RBI Deputy Governor on new banking licences tomorrow, IBA Chief Executive K Ramakrishnan told PTI.

Select bankers, led by Bank of Baroda Chairman and Managing Director M D Mallya, would be attending the meeting, he said.

Members of industry chambers CII would also be meeting RBI Deputy Governor Usha Thorat.

In August, the RBI announced discussion paper on new banking licences and regulations for the same to foster greater competition.

"The RBI is considering providing licences to a limited number of new banks. A larger number of banks would foster greater competition, and thereby reduce costs and improve the quality of service," the central bank had said in the discussion paper.

The RBI had also sought to know "whether industrial and business houses could be allowed to promote banks". And, should NBFCs be allowed to convert into or promote banks.

The RBI sought feedback on this as also business model for the new banks by September 30. It was of the view that greater competition would also promote financial inclusion.

Currently, India has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks, and 371 district central co-operative banks.

The RBI said the new licences are required since vast segments of population, especially underprivileged, have still no access to formal banking services.

The discussion paper outlines various pros and cons for norms like minimum capital requirements for new banks and promoters contribution, caps on promoters shareholding and other shareholders, foreign shareholding.

Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be mulling entering the banking space.