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Final banking licence guidelines soon: RBI

Last Updated: Monday, February 18, 2013 - 22:50

Mumbai: The Reserve Bank is likely to come out with the final guidelines for new bank licences much before the end of the fiscal as its consultation process with the Finance Ministry is over, Deputy Governor Anand Sinha said Monday.

"We are in the process of issuing the licence guidelines. We should issue them soon...The consultation process with the Finance Ministry is over; everything is settled now, and we will be issuing the guidelines. (It will be) much before the end of this financial year," Sinha told reporters on the sidelines of an event here.

Referring to allowing corporates to open banks, he said he could not go beyond the draft guidelines.

"I cannot go beyond the draft guidelines because what will be in the final norms, we can't reveal. In the draft guidelines, we have certainly made corporates eligible," he said.

In a TV interview last month, Finance Minister P Chidambaram said no eligible corporate entity should be denied opportunity to enter the banking space.

"But if the guidelines are made out and transparently spelt out and if a corporate satisfies those guidelines, I don't see any reason why a corporate should not be given a licence," he had said.

Sinha Monday refused to quantify the possible number of licences, saying the central bank will be selective in this process. Currently there are 26 public sector banks, 22 private sector banks and over 40 foreign banks.

"We have said clearly in our draft guidelines (that) it will be a selective process naturally, because banks are very important for the financial sector and people have to meet all the criteria ... We don't put a number around that, that will depend on the quality of applications. (It is) very difficult to say anything more at this stage," Sinha said.

Replying to a question whether the RBI will allow real estate companies or brokerage firms to enter the banking fray, Sinha said, "wait for the final guidelines."

In the draft guidelines issued in August 2011, the central bank had said firms with an exposure of 10 per cent or more to real estate and brokerage businesses by revenue or assets would not be eligible for applying for licence.

Referring to the process after issuing final guidelines, Sinha said it would take some time to set up a new bank.

"Once the final guidelines are out, whosoever is eligible will be given time to apply. Then there will be internal evaluation of the applications. We have also said very clearly in our draft guidelines that there will be an external committee which will evaluate the applications. After all these processes, we will give an in-principle licence and we will give them a year to set up banks," he said.

Sinha also said the draft guidelines this time were different from the other two (one in 1991, another in 2001-02), as for the first time, it has included corporates for banking licences in its draft guidelines.

"This is the third time we are going for setting up banks (since the liberalisation). The 1991 guidelines and then 2001 or so... They were slightly different. Base does not change but certain things go on getting added.

"This is very different from those two because here in the draft guidelines we have talked in terms of corporate houses. So it is fundamentally different from the other two," Sinha said, but adding the basic structure remains the same.

"All that happens is that if you are opening it up to a new sector, you have to think in terms of new risks," he said.

A number of large corporate houses, including Anil Ambani-led Reliance Group, financial conglomerates Religare and Shriram groups, engineering-to-technology major L&T group and Aditya Birla group, are said to be interested in entering the banking business depending on the regulatory framework.


First Published: Monday, February 18, 2013 - 22:50
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