First set of banking licences by January: Raghuram Rajan

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RBI Governor Raghuram Rajan said the first set of new bank licences are most likely to be given out by January. RBI Governor Raghuram Rajan said the first set of new bank licences are most likely to be given out by January.
SummaryRBI screening panel to include Usha Thorat, CB Bhave, Nachiket Mor along with Bimal Jalan, who will chair.

The committee appointed by the Reserve Bank of India (RBI) to look into new banking licences will consist of former deputy governor Usha Thorat, former Securities and Exchanges Board of India chief CB Bhave and RBI board member Nachiket Mor, along with former governor Bimal Jalan, who will chair it, said RBI governor Raghuram Rajan on Friday.

Addressing mediapersons in Chhattisgarh, Rajan said the first set of new bank licences are most likely to be given out by January, before deputy governor Anand Sinha retires.

The committee will screen licence applicants after an initial compilation of applications by RBI staff, adding the external committee will make recommendations to the governor and deputy governors, who will make final proposals to the committee of RBI central board.

As many as 26 firms, including top corporate houses like Tata Sons, L&T, Reliance Group, Adiya Birla Nuvo, Bajaj, Shriram and Religare have sought licence. The last day for application was July 1.

Noting the fair amount of public attention has been devoted to new bank licences, Rajan had earlier said, “RBI will give out new bank licence as soon as possible, consistent with the highest standards of transparency and diligence.”

In last 20 years, 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.

The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks and fresh applications were invited. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licenses from the RBI in 2003-04.

In a discussion paper released in August, RBI had discussed the possibility of issuing bank licences, thereby looking at a continuous authorisation of new banks.

While issuing the final guidelines, the central bank has said it would consider issuing licenses only if the applicant meets all “fit-and-proper” criteria. A company or a conglomerate can start a bank only if it has a successful track record in its business, has R500 crore to spare for initial capital and has a realistic and viable business plan. Further, RBI can also ask for reports from other agencies such as the Central Bureau of Investigations before giving out bank licences.

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