Ball on new pvt banks set to roll in April | india | Hindustan Times
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Ball on new pvt banks set to roll in April

india Updated: Mar 11, 2010 20:30 IST
Sandeep Singh
Sandeep Singh
Hindustan Times
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The Reserve Bank of India is expected to announce the start of a process that would allow more private banks at its monetary policy review meeting in April, following the finance minister’s announcement in his budget speech last month that fresh licences would be given to private players and non-banking financial companies (NBFCs).

“It may take close to 12 to18 months to finally set up those banks but the process of framing the eligibility criteria may start next month,” said a source close to the development.

The RBI spokesperson declined to comment but said, “There is neither a time-frame nor have we fixed number in mind when it comes to issuing banking licences,” she said.

The companies or business houses that have been eyeing a banking licence include Tata Capital, the Aditya Birla Group, Reliance Capital from the Anil Dhirubhai Ambani Group (ADAG), the Religare Group and the Bajaj Group.

Finance Minister Pranab Mukherjee said in his speech that RBI was considering “additional banking licences” and NBFCs will also be allowed, subject to RBI’s elgibility criteria.

The source said the licensing policy may reveal tilt towards NBFCs which are being tapped to expand the reach of banks into the country’s hinterland.

“This falls in line with the overall goal of achieving higher financial inclusion and widening of the banking network,” said the source.

The current guidelines requires a minimum capital of Rs 300 crore for firms to plan new banks, and restricts the shareholding of a single entity or group of related entities directly or indirectly at 10 per cent of the paid-up capital of the private sector bank.

“There is nothing wrong with the current guidelines and there is a possibility that they may largely remain the same,” said the source.

There are many private groups who have been planning to enter this space and this might come as a big opportunity to them.

While capital may not be a big issue, the shareholding of more than 10 per cent by the promoter entity may emerge as a dampener to some corporate houses.

“They still can qualify as RBI may ask them to reduce their holding gradually over a defined period,” said the source.