Report on new bank licences 3 months after screening: Jalan

Indicates the new licences wouldn't be given out by January, contrary to expectations

 

The committee entrusted with screening the applications for new bank licences will give its report within three months of the central bank completing the inspection of all 25 applications. The committee is headed by former Reserve Bank of India (RBI) governor Bimal Jalan.

“RBI is doing an intensive scrutiny of all the parameters, according to the guidelines. It has set a timeline of three months after RBI has done its scrutiny. We do not want to rush these things, as it concerns public money,” Jalan said on the sidelines of the Delhi Economic Conclave here on Wednesday, indicating the new licences wouldn’t be given out by January, contrary to expectations.

Atleast 25 companies have applied to RBI to open banks. Among these, significant private ones are Anil Ambani-led Reliance Capital, Aditya Birla Nuvo, L&T Finance and Bajaj Finserve Ltd. Prominent names from the public sector are India Post, LIC Housing Finance and IFCI.

“We are trying to frame a policy on banks...We will take a decision which is in our interest and public interest...To me, time is not that important,” Jalan said.

It is expected the committee will carry out the first level of screening at its second meeting likely to be held on Monday. The first meeting in this regard was held on November 1.

Meanwhile, the parliamentary standing committee on finance, headed by Bharatiya Janata Party leader Yashwant Sinha, has opposed granting bank licences to large enterprises. “Banking being a highly leveraged business involving public money and public welfare. The committee is of the opinion it will be better to keep industry and banking separate,” Sinha said in a report, adding RBI should examine the applications in a “well defined and transparent manner”.

After RBI said applications for bank licences should be given by July 1, 26 firms had applied.

However, last month, Tata Sons withdrew its application, citing the needs of its domestic and foreign businesses.

The committee on screening bank licence applications includes former RBI deputy governor Usha Thorat, former Securities & Exchange Board of India chairman C B Bhave and RBI central board director Nachiket M Mor.

Earlier, RBI Governor Raghuram Rajan had said banking licences would be granted to successful candidates by January. But delay looks imminent, as the central bank is still engaged in collecting necessary information on the applicants.

In the last 20 years, RBI has given licences to 12 banks in the private sector; the most recent were those to Kotak Mahindra Bank and YES Bank.