New private banks stuck in pipeline

The country will have to wait for a few months for the anticipated rush of private sector banks that finance minister Pranab Mukherjee’s budget announcement had promised. Mahua Venkatesh reports.

The country will have to wait for a few months for the anticipated rush of private sector banks that finance minister Pranab Mukherjee’s budget announcement had promised.

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Mukherjee had said in his budget speech that the Reserve Bank of India would grant fresh licences to private sector banks in view of the growing market. However, RBI has not come out with draft guideline on the same, and 2011 is unlikely to see the entry of any new private bank, a senior RBI official said.

Framing the guideline is taking more time than expected as the suggestions received by the central bank from various quarters is extensive, the official told Hindustan Times.

“It is taking some time as the suggestions are so vast that we are taking some time to incorporate as much as possible,” the official said. The central bank was earlier slated to come up with the guidelines by March.

A host of business groups, such as the Adiyta Birla Group, Religare Enterprises, the Tatas and Reliance have evinced interest in entering the Indian banking sector. The entry of new faces would change the contours of the banking industry and induce more competition.

Mukherjee had said that the entry of new banks would help in financial inclusion.

In 1993, about a dozen licenses were given, though only about three have survived. The objective then, however, was to infuse competition. Now the government is looking at expanding the banking net through financial inclusion. HDFC Bank and UTI Bank—now re-christened Axis Bank — were among those given licenses in the early 1990s.

At present there are 27 public sector banks, 22 private and 31 foreign ones, apart from rural and cooperative banks.