Some bank licence applicants had undue optimism, says Mundra

Reserve Bank of India Deputy Governor S S Mundra on Monday said a few people might not have thought through fully before applying for bank licences.

Three payments bank licence holders - Cholamandalam, Dilip Shanghvi with Telenor and IDFC Bank as well as Tech Mahindra have expressed their unwillingness to open payments banks, reducing the number of entities planning to open payments banks to eight, from the 11 earlier.

Both Mundra and RBI Governor Raghuram Rajan have expressed their disappointment in the returning of the licences earlier.

On Monday, Mundra said while the entry barrier for licences was high in the country, the number of applicants who technically qualify to float niche banks was large, but not all could be thinking through their plans in advance.
 

"Even with big qualification barriers, we get a large number of applications. Sometime while doing that (applying for licence), some of them will be having some undue optimism, as we have seen in the recent episodes. But some of them also get wise within time and before they move in the direction, somewhere they decide to do a course correction, as a few people have done in the recent past," Mundra said. He was speaking at the launch of Bandhan - The Making of a Bank, by former journalist Tamal Bandyopadhyay.

U K Sinha, chairman of the Securities and Exchange Board of India (Sebi) expressed surprise at the number of firms raising unauthorised deposits from West Bengal, a state where the new Bandhan Bank is based.

"Unauthorised money-raising is a major issue in east India. West Bengal is also the place where such mushrooming of firms has come up. The story needs to go much deeper as how such a large number of people get duped there," Sinha said, adding the capital markets regulator has already shut down about 250 such illegal entities, with one crossing deposits worth more than Rs 50,000 crore.