What the Reserve Bank of India wanted in discussing new banking licence regulations might have been suggestions for clarity. What it has got is a cackle of lobby voices.
Feedback released by the RBI on the issue suggests that incumbent banks are not in favour of giving bank licences to corporate houses — something that critics might see as anti-competitive behaviour.
Banks say the playing field might become uneven because a bank sponsored by a business house will have access to large capital. On the other hand industry associations have favoured new licences to business houses.
While banks and industry bodies favour a high start-up capital of more than Rs 1,000 crore, to ensure that only serious players can enter, non-banking financial companies (NBFCs) and microfinance institutions (MFIs) have pushed for a lower start-up capital of Rs 300-500 crore.
An RBI release suggests that a leading industry association has argued that conversion of NBFC into bank should not be permitted due to difficulty in aligning its business model to banking.
Banks, however, have said that only standalone NBFC’s should be allowed and those sponsored by business houses should be excluded. It has also been argued that real estate groups should not be barred from entering the banking sector.