Bank licence applicants names to be published on RBI website

Written by Sitanshu Swain | Kumud Das | Mumbai | Updated: Apr 26 2011, 06:48am hrs
In a welcome move, the government will follow transparency norms diligently while granting banking licences to private sector players including big corporate houses. The Reserve Bank of India (RBI) is proposing to put the names of all the players who will apply for the new bank licences on its website right from day one.

This is for the first time that any regulatory body in the country will be publishing the names of competing candidates for licences right at the beginning of the selection process.

The purpose is to invite public opinion about the prospective players who will be rigorously investigated as a part of the selection process.

Following the controversy surrounding the 2G scam, the central bank, in consultation of the ministry of finance, has decided not to take any chances about the selection of players.

According to people aware of the matter, the process for the issuing the final norms for giving licences are being delayed as a matter of conscious decision, with the ruling Congress party also backing it. RBI, which is readying the draft norms on new banking licences, is closely following the 2G scam investigation.

There are two key issues the central bank would strictly monitor as part of its fit and proper norms while considering granting licences to corporate houses. One prerequisite would be a spotless image, and two, applicants need to have enough exposure to the financial sector. Though how the banking regulator will define reputational factors is not known, sources say that the RBI will take into account many issues including legal cases, charge sheets, etc.

It is not necessary that the corporate houses should have court verdicts against them to be considered as having bad reputation, even their names cropping up in any investigation in the past can go against them. It will be purely up to the RBI to interpret the reputational factor as part of its fit and proper exercise. There will not any set of norms laid down for this, said a person aware of the matter.

The central bank will finalise the norms for giving licences after getting feedback about its draft norms , which will likely coincide with the amendment of the RBI Act by Parliament to arm the banking regulator to supersede bank boards in case of any violation of regulations.

Once the guidelines are issued, it would be referred to a so-called external group of advisors. The group of advisors would be advisory and the onus of decision-taking would appropriately rest with the RBI, said the person cited earlier.