The Election Commission (EC) on Tuesday allowed the Reserve Bank of India (RBI) to begin the process of granting licences for setting up new banks.
“The commission is of the view that the RBI may take necessary action (for grant of in-principle approval for banking licences) as deemed appropriate,” the EC said on Tuesday.
The RBI had approached the EC on March 12 to seek its approval as a matter of caution to ensure that issuing new bank licences does not violate the poll watchdog’s model code of conduct.
The code of conduct, which prevents authorities from taking decisions that may been seen as aimed at influencing voters, remains in force till the polls are over.
Earlier in the day RBI governor Raghuram Rajan said the central bank would be able to announce new bank licenses “very quickly” once the EC gives the permission to do so, and in future there is a need to award licences more regularly.
“This (granting bank licenses) is a regulatory process and not a governmental one. The notion of asking the EC was because this is election season and we didn’t want the potential licensees to get their approvals under a cloud,” said Rajan.
The RBI had received 27 applications initially. Later, Tata Sons and Value Industries withdrew, leaving 25 contenders in the race.