Bank permits: RBI likely to issue norms by Feb

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International Monetary Fund recently cautioned the RBI against giving bank licences to corporate entities. (Reuters) International Monetary Fund recently cautioned the RBI against giving bank licences to corporate entities. (Reuters)
Summary* Four licences likely to be up for grabs for pvt firms

The Reserve Bank of India is unlikely to wait for the Union Budget 2013-14 and is expected to issue final guidelines for new bank permits by next month.

“They are expected soon. The Budget is merely going to announce that new bank licences will be issued soon,” said a person familiar with the development. Four new bank permits are likely to be up for grabs for private sector entities.

The final guidelines are expected, even as the International Monetary Fund recently cautioned the RBI against giving bank licences to corporate entities, as the risks in such a decision would be more than the benefits from setting up new banks.

The finance ministry has already sent its comments to the central bank on the guidelines and has suggested certain relaxations, including dropping a clause that bars real estate and broking firms from applying for the licences. It believes that there are adequate safeguards to prevent any exposure to promoter-related entities.

It has asked the RBI to clearly define ‘promoter’ entities and has also proposed that the Non-Operative Holding Company (NOHC) may be substituted by the Non-Operative Financial Holding Company (NOFHC) to signify that only financial sector entities are part of the NOFHC.

The finance ministry has been prodding the RBI to issue final guidelines for bank permits since the Banking Laws (Amendment) Bill, 2011, was passed by the Parliament in the Winter Session.

A number of large corporate houses including L&T, Anil Ambani-led Reliance Group, Mahindra & Mahindra, Bajaj Group, financial services conglomerate Religare Enterprises and Shriram group have evinced interest in applying for new bank licences.

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