RBI, in its annual credit & monetary policy unveiled on Tuesday, has said all applications received for getting new bank licences would be referred to an external expert group for examination and recommendations to the RBI for granting licences.

RBI will also prepare a discussion paper marshalling the international practices, the Indian experience as also the extant ownership and governance (O&G) guidelines on the issue of granting licences to the new players and place it on its website by end-July 2010 for wider comments and feedback.

Finance minister Pranab Mukherjee, in his Budget speech, had announced that RBI was considering additional banking licences to private players. NBFCs could also be considered, if they met RBI?s criteria.

About 12-15 NBFCs and corporate houses, including Tatas, AV Birla Group, Reliance ADAG group which already have financial sector exposure, have already shown their keenness to join the race to apply for bank licences. Shriram Transport Finance has made its intentions clear on its banking foray and got internal approvals for the same. Shriram sees huge potential in credit to micro SMEs and the growing number of customers moving into upper middle class.

Mahindra and Mahindra group has set its eyes on the banking sector. The group may foray into banking through its non-banking financial arm, Mahindra Finance. Speaking to FE, Ramesh Iyer, MD, Mahindra Finance, said the group is excited about the matter and is awaiting guidelines from RBI.?We are very excited about the announcement. We are not saying a ?no? to go-ahead for the banking licence,? said Iyer.

Leading microfinance player SKS Microfinance is planning to enter the banking space and is awaiting RBI guidelines to seek the licence, a source close to the development said. SKS Microfinance is likely to approach the RBI for a banking licence once the guidelines are issued, said a source.

SKS Microfinance?s interest in banking is prompted by the fact that it would help it reduce its capital by half. Currently, the cost of capital for microfinance players stands 12-13 %, but once a bank, it will decline to 6-6.5 %. This in turn, will enable MFIs reduce lending rates to their customers from an average of 28% to about 21-22 %.

Nabard is not averse to the idea of setting up a bank, its chairman, UC Sarangi said. Recently, Nabard had appointed global management consultancy firm, Boston Consulting Group (BCG) to prepare a report to restructure and diversify its operations to leverage its expertise in refinancing. ?Without compromising our primary mandate, which is refinancing and supporting the needs of agriculture sector in the country, we will not be averse to any new ideas,? Nabard chairman,? U C Sarangi told reporters