With the Reserve Bank of India (RBI) expected to issue banking licences to a host of prospective companies, a fresh licence may be given to a consortium of cash-rich public sector enterprises (PSUs).
“The finance ministry is keen that one new bank licence be given in the public sector space to a consortium of say three-four cash-rich PSUs,” a top government official, who did not wish to be identified, told HT.
“This will be in addition to the all-women public sector bank that was announced by finance minister P Chidambaram in his budget speech,” he added.
The RBI, in its guidelines issued in February, stated that applications from public and private sector companies for setting up banks must come in by July 1. However, the central bank has not received any application yet.
The finance ministry is keen to have more banks in the country to promote financial inclusion and infuse competition that brings in more efficiency in the financial sector. Chidambaram has also indicated at possible mergers and acquisitions (M&A) in the banking industry to allow a few large banks to emerge.
As reported first by HT on May 23, the first M&A could well be between state-owned Power Finance Corporation (PFC) and a public sector bank. The finance ministry is currently holding consultations with the RBI on PFC's proposal that has short-listed five banks including Punjab and Sindh Bank, Indian Bank, Central Bank of India, Bank of Maharashtra and the United Bank of India.
According to RBI norms, a company wishing to foray into banking would be required to keep its banking arm completely separated from its other businesses.