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HindustanTimes Sat,19 Apr 2014

The Jalan way: Independent cos lead bank licence race

HT Correspondent, Hindustan Times  New Delhi, February 25, 2014
First Published: 23:54 IST(25/2/2014) | Last Updated: 00:12 IST(26/2/2014)

Companies with own distribution networks and no affiliation to any industry group are likely to get priority when the Reserve Bank of India (RBI) starts handing over new bank licences, sources said on Tuesday, after the Bimal Jalan committee that sets the agenda submitted its report to the central bank.

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The news sent shares of IDFC and LIC Housing Finance, which do not have any other industry affiliation, up 1.5% and 3.2%, respectively, on the BSE on hopes that the two may be the leading contenders for new licences. L&T Finance also shot up 3.9% on expectations that it may also win a licence.

Unlisted India Post is also seen as a contender, analysts said.

The Jalan panel was set up to assess and screen the eligibility criteria for applicants seeking to foray into banking services.

“We have submitted the report (on new bank licences) to RBI,” Jalan, a former RBI governor, confirmed after a four-hour meeting.

The report contains names of entities eligible for bank licences. However, it was not immediately known how many applicants have been shortlisted by the panel.

Finance minister P Chidambaram is likely to hold a meeting on March 10 to finalise the names of the new entrants, the sources connected with the development said.

“There will be another meeting, which would be held around March 10 to look into the recommendations and finalise the names,” an official who refused to be identified told HT.

The guidelines for setting up new private banks were issued in February 2013. The last day for applications was July 1 and RBI received 27 applications. Later, Tata Sons Ltd and Value Industries Ltd, a unit of Videocon Ind., withdrew applications.

Public sector and state-controlled units including India Post, IDFC and IFCI and private sector entities such as the Anil Ambani group and the Aditya Birla group were among the 25 players in the fray for new licences. Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital are some of the other applicants.

In the past 20 years, RBI has licensed 12 banks in the private sector in two phases. Ten banks were licensed on the basis of guidelines issued in January 1993. RBI last issued bank licences 10 years ago in 2003-04 to Yes Bank and Kotak Mahindra Bank.

(With agency inputs)

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