Companies may get in-principle nod to set up banks

  • Mahua Venkatesh, Hindustan Times, New Delhi
  • |
  • Updated: May 11, 2013 02:16 IST

The Reserve Bank of India (RBI) could look at giving in-principle approval to companies seeking banking licenses, based on their proposals.

The RBI is likely to issue a clarification on the Guidelines for Licensing of New Banks in the Private Sector by month end or early next month.

Companies including Larsen  & Toubro, Aditya Birla Group, Reliance ADA Group, Religare and state-owned Power Finance Corporation have shown interest to foray into the banking sector.

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All companies were required to submit applications to the RBI by July 1 to set up new banks according to the RBI guidelines on new licences issued in February. However, the central bank is yet to receive any such application.

A company wishing to foray into the banking sector would be required to restructure operations in such a manner that the banking arm is completely alienated from other businesses, the RBI guidelines had stated. However, since companies are apprehensive about the whole process, there is pressure on the RBI to give in-principle approval to companies before they go in for the restructuring exercise.

“Companies are uncomfortable with the current guidelines and before the restructuring exercise is taken up, there has to be clarity on whether or not the license would be granted... if the application is rejected after the whole process it would have an adverse impact on the company,” a senior executive of a private sector company wishing to apply for a licence told HT.

“The RBI has considered that every clarification should be publicly disseminated, which would avoid repetitive queries and also ensure a level-playing field,” Namo Narain Meena, minister of state for finance, said in Parliament earlier this month.

The RBI last issued licences 10 years ago in 2003-04 to Yes Bank and Kotak Mahindra Bank.

 

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