The Reserve Bank of India set the stage on Wednesday for the entry of more banks in the country by throwing open proposals to issue a limited number of licences to set up new banks.
In a discussion paper, the central bank aimed for conditions to make sure that its founders bring in enough capital, have a sound track record and have no conflict of interest that could hamper the sensitive financial business.
Under RBI's proposals, experienced non-banking financial companies (NBFCs) get a boost, while business houses with links to real estate have to stay away from banking.
Titled, 'Entry of New Banks in the Private Sector,' the paper is open for comments from stakeholders until September 30. Guidelines to grant new bank licences will be framed before applications are invited to set up new banks.
A key aim for RBI would be reaching out to the vast segment of the population that has no access to banking services to promote inclusive economic growth.
"A larger number of banks would foster greater competition, and thereby reduce costs, and improve the quality of service," the paper said.
While Tata Capital, the Aditya Birla Group, Reliance Capital of the Anil Dhirubhai Ambani Group (ADAG), the Religare Group and the Bajaj Group want to start banks, the apex bank is weighing the pros and cons in letting them in.
RBI looks certain to raise capital requirements for new banks. It now stands at Rs 200 crore with a prescription to raise it to Rs 300 crore within a span of three years. The plan is now to possibly take it up as high as Rs 1,000 crore.