Final rules on new bank licences expected soon

The Reserve Bank of India (RBI) is expected to come out with final guidelines for new banking licences in the next two weeks, sources close to the development said.

Finance minister Pranab Mukherjee had announced the Union government’s willingness to issue new licences during the budget announcement in February last year.

One person said the central government has given its nod to the final guidelines on Monday.

“If this information is true, then it is highly encouraging for the banking sector. There were certain policy matters which the regulator could not take a call on (like foreign direct investment in banking). Therefore the finance ministry’s comments were required,” said Ashvin Parekh, partner and national leader, financial services, Ernst & Young.

The RBI’s first draft of the new banking guidelines had been put up on its website in August last year for public discussion and comment.

As per the views received, banks were not in favour of the proposal due to unsavoury past experience.

They were also of the view that the large capital buffer that would be available to the banks sponsored by industrial/business houses would create an uneven playing field for existing banks.

Public sector bank employees had announced a strike to oppose entry of corporates into private sector banking, earlier this month.

“The RBI will have to be clear about certain things that it had mentioned in the first draft, such as the role of promoters in new banks, size of capital and allowing corporates to entry,” said Monish Shah, director, Deloitte Haskins & Sells.