RBI plans limited new bank licences

The Reserve Bank of India
(RBI) on Wednesday said it intends to grant a limited number of new bank licences, a move that was earlier flagged by the government to expand the geographic reach of the sector.

The RBI, in a discussion paper on the subject of entry of new banks, has invited comments on the minimum capital requirements as well as promoters shareholding in new banks.

The RBI also initiated discussion on foreign shareholding in new banks, whether industrial and business houses could be allowed to set up banks and if finance companies should be allowed to convert into banks or set up a bank.

The central bank highlighted the pros and cons and the past international experience on all the parameters on which it has invited the comments.

On Tuesday, junior finance minister Namo Narain Meena told lawmakers 18 foreign banks have approached the RBI for opening their maiden branches or representative office.

Finance Minister Pranab Mukherjee had, in the budget for 2010/11, announced the intention to grant additional banking licences to private sector players to expand coverage.

The RBI's previous guidelines on new bank licences released in January 2001 were "cautious in nature," the RBI said.

"Based on the feedback, comments, suggestions received on the possible approaches discussed in this paper and detailed discussions with the stakeholders, the RBI will frame detailed guidelines for licensing of new banks and invite applications for setting up new banks," the RBI said.

Subsequently, an external group would examine the applications received and make recommendations to the RBI with regard to granting licences to the applicants, it added.

Courtesy: Reuters