Will look into possible conflict of interest in Birla's bank licence plea: RBI

RBI today said it will look at whether there is any conflict of interest arising out of a bank licence application filed by Aditya Birla Nuvo, whose group Chairman Kumar Mangalam Birla happens to be on the board of the central bank.

"We have to take a view on that. This is a very recent development," Reserve Bank Governor D Subbarao told reporters after a meeting here of the central board.

He was replying to queries on possible conflict of interest in the case of Birla group's application for a bank license.

"(Kumar Mangalam) Birla has been our Director of Central Board for the last six years. So, we will have to discuss that with the government," Subbarao said.

Birla is a nominated member on RBI's 21-member central board of directors. His group firm Aditya Birla Nuvo Ltd is among the 26 entities that have applied to the RBI for a bank licence.

In response to PTI query, Aditya Birla Nuvo said there is no conflict of interest. "There is no conflict of interest whatsoever," the company's Managing Director Rakesh Jain said.

Earlier this week, RBI announced that 26 entities applied for grant of bank licences.

Subbarao had earlier said that "our effort will be to make that judgement as transparent as objective... As possible...I want to say that not everybody who is fit and proper will be given a (bank) licence because we expect the number of eligible applicants will be much larger than what is meaningful number of licences we can give".

The Reserve Bank is expected to grant new licences by March next year.

India has 26 public sector banks, 22 private sector banks and 56 regional rural banks.

Ten banks were licenced on the basis of guidelines issued in January 1993. The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks, and fresh applications were invited.

Of the 10 licences issued in 1993, four banks merged with other lenders over a period of time. Times Bank merged with HDFC Bank, while Global Trust Bank was amalgamated with the state-owned Oriental Bank of Commerce.

Centurion Bank took over Bank of Punjab to become Centurion Bank of Punjab, which merged with HDFC Bank in 2008.