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Companies will have to wait for banking foray

business Updated: Jun 03, 2013 21:05 IST
HT Correspondent
HT Correspondent
Hindustan Times
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The companies, which are looking to get banking licences from the Reserve Bank of India (RBI) will have to wait till the end of 2014. The banking sector regulator on Monday extended the validity of in-principle approval for new banks to 18 months from one year in order to provide more time for smooth transition and to meet regulatory requirements to companies to set up banks.

“RBI has been requested to clarify as to whether it would provide more time for a smooth transition from the existing structures to that prescribed in the guidelines as also for meeting the regulatory requirements,” said the central bank in clarifications issued relating to banking licences. “It has, therefore, been decided to extend the validity period of the in-principle approval from one year to 18 months.”

The RBI issued guidelines in February allowing any type of company to set up a bank in India paving the way for a new set of private banks. RBI said that applicants must take approval from other regulators to bring in entities regulated by them under the bank holding company. It had also said private companies and public sector entities with sound credentials, Rs 500 crore capital and a minimum track record of 10 years would be allowed to enter the banking business.

The central bank also said applicants must have public shareholding of at least 51%. For conglomerates, only non-financial services companies and non-operative financial holding companies will be allowed to hold shares of the bank holding company.

‘Everyone may not get permits’

Making it tougher for aspirants, the Reserve Bank said it will look for very high quality applications to issue new bank permits and may not be possible to issue licences to all eligible applicants.

“There is no predetermined number. RBI will be very selective while considering the applications for new bank licences. It will look for very high quality applications,” the RBI said “It may, therefore, be not possible to issue licence to all the applicants meeting the eligibility criteria.” PTI

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