RBI warms up to brokerage, realtor banking foray

Written by Press Trust of India | Mumbai | Updated: Feb 27 2013, 07:14am hrs
Reserve Bank deputy governor KC Chakrabarty said on Tuesdau the RBI is open to let realty and brokerages run banks if they meet the fit and proper criteria as detailed in the final guidelines.

These are legitimate businesses...if they can demonstrate that they satisfy all the requirements, all the concerns...how can you deny them... definitely, if this is not in the guidelines, then it is open, Chakrabarty said when asked whether real estate and brokerage firms would be allowed to start banks as final guidelines were silent.

He was talking to reporters on the sidelines of an event and this was the first official reaction from the regulator after it released the final guidelines for new banking licences last Friday. The final guidelines by the Reserve Bank of India made a climbdown from the initial stance, which in the draft norms issued in August 2011, had virtually barred realtors and brokerages from its eligibility criteria. There are certain activities, such as real estate and capital market activities, in particular broking activities, which apart from being inherently riskier, represent a business model and business culture which are quite misaligned with a banking model, the draft guidelines had said.

When asked about the number of licences that may be issued, the deputy governor said the number of new banks will depend on the eligible candidates and it would be premature to give a specific count now. First, lets see how many people are eligible, how many are fit and proper, Chakrabarty said.