Business Standard

'All eligible applicants may not get bank licence'

RBI to discuss Kumar Birla's board position with the government

Subbarao D, RBI governor

BS Reporter Chennai
The Reserve Bank of India (RBI) today said all eligible applicants might not be allowed to promote banks, even as it refused to reveal the number of banking licences it aims to offer. The central bank will also review Kumar Mangalam Birla’s presence on its board.

Birla is the chairman of the Aditya Birla Group, which has applied for a new banking licence through its group company Aditya Birla Nuvo. RBI has received applications from 26 companies for banking permits.

The central government nominates industrialists on RBI board. Apart from Birla, Azim Premji (chairman of Wipro) and G M Rao (chairman of GMR Group) are also on the central bank’s board.

“This (Aditya Birla applying for a banking licence) is a recent development, whereas he (Birla) has been on the board for the last six years. We will discuss this with the government,” RBI governor D Subbarao told reporters after the central bank’s board meeting here on Thursday.

“We do not want ourselves to be locked with any specific numbers in terms of giving licence. Internally, we will evaluate the applications in the next three-four months, then we will remit this to an external committee to stream the applications and then we will make a decision. We have to see the quality (of applicants),” he added.

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Finance minister P Chidambaram in a recent meeting with bankers had asked the lenders to reduce rates to encourage investment activities and drive economic growth. Subbarao said the central bank was doing its best through monetary policy action to maintain a balance between growth and inflation dynamics. “The objective of the policy is price stability, financial stability and growth. We are conscious about that. We have regards for the finance minister’s opinion and the government’s concern. We are doing our best to balance.”  

He has reiterated that RBI intervene in the currency market to manage volatility and do not have any specific target for exchange rate. The rupee has depreciated by 9.4 per cent against the greenback since the beginning of this financial year.

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Subbarao expressed concerns on the rise in bad loans in the banking system, but said domestic banks were well capitalised to weather any crisis arising out of non-performing assets. The governor said RBI was likely to take actions against some of the banks for violating its know-your-customer (KYC) and anti-money laundering (AML) rules. “We have taken actions against some specific banks and in the process of taking some more actions in few other banks,” he said.

RBI has recently fined ICICI Bank, HDFC Bank and Axis Bank Rs 1-5 crore after it found that the three private lenders have violated KYC and AML norms.

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First Published: Jul 05 2013 | 12:50 AM IST

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