India Post and IDFC have emerged as frontrunners to receive new banking licences on the back of their strong distribution networks and credible records.
The committee led by former Reserve Bank of India governor Bimal Jalan, which submitted its report to the central bank last week, is of the view that these two applicants are ready to foray into banking services, a source who did not wish to be identified said.
The report contains the names of all eligible applicants wishing to set up banks. The committee began assessing applications at its first meeting on November 1.
"While the report is yet to be looked into, there is a high chance of giving licences to India Post and IDFC due to their large existing network," the source said, without divulging details.
The central bank will hold a meeting with finance minister P Chidambaram in the next 10 days to discuss the issue. The final names are likely to be announced by month-end.
India Post, being a government body, technically needs Cabinet approval to set up a bank. The interim budget unveiled by finance minister P Chidambaram recently did not earmark any funds for the postal department or mention the proposal in the budget. However, in case its name gets cleared, the formal proposal can be sent to the Cabinet for approval at a later stage or to a new government taking office after elections expected in April-May.
A full budget expected to be presented by the new government in July-August is likely to contain a detailed provision to help India Post set up a bank.
India Post has a nationwide network of 155,000 post offices and already has experience in administering a savings bank scheme, selling tax-saving instruments and accepting PPF deposits.
IDFC has been involved in infrastructure funding, asset management (mutual fund) and private equity services, which are closely linked to banking.
"I am trying that Post Office should get a banking licence to serve the common man in rural areas. I will keep by struggle on for banking licence," communications minister Kapil Sibal had said recently.
The RBI received as many as 27 applications but Tata Sons Ltd and Videocon Group's Value Industries Ltd later withdrew themselves from the race.
Besides India Post and IDFC, IFCI, Anil Ambani's Reliance Group, Aditya Birla Group, L&T Finance Holdings and Muthoot Finance, are also in the race to set up new banks.