No information on EC reply on bank licences: Chakrabarty

A section of the media today reported, quoting an unnamed EC official, that it may not allow RBI to go ahead with the plan before the polls

Amid reports in a section of the media that the Election Commission (EC) might put a spanner on the Reserve Bank of India (RBI)’s plan to issue new bank licences by month-end, the central bank’s Deputy Governor K C Chakrabarty on Thursday said he was not aware if the poll panel had relayed its view to RBI in this regard.    

“I only know the RBI has written to the EC, seeking their views on this (issuing new bank licences). Whether they have replied or not I have no idea. Uptill yesterday, I had no information on that,” Chakrabarty told reporters on the sidelines a function here.    

A section of the media on Thursday reported, quoting an unnamed EC official, that it might not allow RBI to go ahead with the plan before the polls and that it needs more clarity from Mint Road on certain aspects. This is despite both Finance Minister P Chidambaram and RBI Governor Raghuram Rajan expressing confidence the EC would not have any issue on the topic, as the bank licence was a process that started much before the poll season. The process, in fact, began with the FY11 Budget and was speeded up last July when 26 companies applied for entering the banking fray. Since then the Tatas and the Mahindras withdrew from their applications saying given the stringent criteria it would be better for them to continue with their NBFC services.

As many as 24 public and private sector applicants, including India Post, IFCI and large business houses such as the Anil Ambani group and the Aditya Birla group, have applied for bank licences.     The RBI has reportedly written to the EC in the first week of March seeking its approval for its plan. After the last RBI board meeting on March 7, Rajan had said that new bank licences would be issued in a few weeks after taking the EC on board.     

"My sense is, if all goes well, we should be able to do it in a few weeks," Rajan had told reporters. Rajan, however, added that the RBI would seek formal approval from the EC before issuing the licences as the model code of conduct is in force.     

"Look, we have to (seek) the formal approval from the EC that announcing the bank licences will be okay. A number of people have said it will, but it would be best that the process is formally approved by the EC," he had said, adding the process was started last year and was not a new proposal.