Two Local Area Banks Get Rbi Clearance

The Reserve Bank of India (RBI) has given an in-principle approval for the establishment of two local area banks (LABs). This is the first batch to get the central banks nod following the budget proposal to set up these banks.

One of the banks will be set up in the districts of Jalgaon, Jalna and Aurangabad, in Maharashtra. The other is to be floated in the districts of Dakshina Kannada, Uttara Kannada and Shimoga, in Karnataka.

According to the LAB guidelines, the banks area of operations should be spread across a maximum of three geographically contiguous districts.

At the end of December 1996, as many as 50 applications, backed by project reports, had been received by the RBI. The decision on these proposals, being examined by the central bank, will be taken keeping in mind the objective of establishing such facilities in non-urban areas.

 

Promoters of LABs could be individuals, corporate entities or trusts. The minimum paid-up capital for a local area bank will be Rs 5 crore. The promoters contribution should be at least Rs 2 crore. Proposals with diversified share holdings will be preferred.

In the application for a banking licence, the details of the initial contribution of promoters has to be indicated. Also, the method used to raise the minimum share capital of Rs 5 crore will have to be mentioned.