There will be some good news for the bank aspirants in the new year. The Reserve Bank of India (RBI) which currently giving final touches to the new bank licence norms, is likely release the final norms in January, sources in the central bank said.
However, the process of inviting the applications may not start immediately, sources said.
After the final norms are issues, the central bank is expected to set up an external committee which will screen the application of prospective entrants. After the panel is set up, RBI will start accepting applications. It may take some time for before fresh applications come in, sources said.
The process of issuing the final norms was expedited by the banking regulator following the passage of the Banking Laws (Amendment) Act in Parliament earlier this month. The law was amended to give more power to the central bank, like, to supersede a bank’s board and to inspect bank’s subsidiaries, -- a demand made by RBI governor D Subbarao for allowing new entrants in the banking sector.
Though final norms will be issued in January, but it may take another 6-12 months for the regulator to complete the screening process and issue the first set of licences. In the first phase, 3-4 entities are expected to get licences.
RBI is expected to give a one year time frame to the entity after awarding the licence, to open the first branch. Banking aspirants said that a full-fledged branch, having core banking solution, could be opened in 6-8 months from the date of receiving the licence.
Though the central bank is open for considering the industrial houses for bank licences, it is not clear if they will get the licences in the first phase.
Apart from industrial houses, non-banking companies also aspire to get licences but the regulator has made it clear that real estate, broking entities will not be considered.
Following the budget announcement by Pranab Mukherjee, the former finance minister and now the country’s President, in 2010-11 that non banking finance companies and business houses would be allowed to set up new banks, the banking regulator started the process of framing fresh guidelines for entry of new banks. RBI released a discussion paper on the entry of new players 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. The consultation process with the stake holders on the issue has been completed.
