Ending weeks of uncertainty, the Election Commission on Tuesday allowed the Reserve Bank to issue licences for setting up new banks.
“The Commission is of the view that the Reserve Bank of India (RBI) may take necessary action (for grant of in-principle approval for banking licences) as deemed appropriate,” the poll watchdog wrote to RBI Governor Raghuram Rajan on Tuesday.
The approval came after the RBI missed the March-end deadline for issuing the first bank licence in almost a decade.
The RBI on March 12 approached the Election Commission (EC) seeking its approval for granting bank lincences as the model code of conduct had come in place after the general elections announcement on March 5.
The RBI had received 27 applications initially. Later, Tata Sons and Value Industries withdrew, leaving 25 contenders in the race.
Public sector India Post and IFCI and private sector Anil Ambani group and Aditya Birla group were among the 25 players in the fray. Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital have also applied.
Earlier in the day, the RBI Governor while unveiling bi-monthly monetary policy said that once the central bank gets the Election Commission approval it would expedite the process and grant licences.
“Once they (EC) say there is no issue there, they (RBI) would be in a position to announce the bank licences very quickly after taking it to the committee of the central board,” Dr. Rajan said.
In the past 20 years, the RBI has licensed 12 banks in the private sector in two phases. Ten banks were licensed on the basis of guidelines issued in January 1993.
Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licences from the RBI in 2003-04.