RBI gets EC nod for issuing new bank licences

The Reserve Bank of India (RBI) is all set to give in-principle approval for a few new banks after the Election Commission of India gave its nod for the issue of new bank licences.

The Election Commission on Tuesday gave its approval for issuing new bank licences ending weeks of uncertainty.

RBI had, on 12 March, approached the EC seeking its approval for granting new bank licences as the model code of conduct had come into effect after the EC, on 5 March, announced the dates for general elections.

"The commission is of the view that the Reserve Bank of India may take necessary action (for grant of in-principle approval for banking licences) as deemed appropriate," EC wrote to RBI governor Raghuram Rajan.

RBI, however, missed the March-end deadline for issuing new bank licences.

RBI had received 27 applications initially, of which Tata Sons and Value Industries withdrew, leaving 25 contenders in the fray.

Public sector India Post and IFCI and private sector Anil Ambani group and Aditya Birla group were among the 25 players in the fray. Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital have also applied for bank licences.

A panel headed by former RBI governor Bimal Jalan had submitted the list of probable new licensees to the central bank in January this year.

RBI governor Raghuram Rajan, while announcing the bimonthly monetary policy earlier in the day had said that once the central bank gets the EC approval it would expedite the process and grant licences.

"Once they (EC) say there is no issue there, they (RBI) would be in a position to announce the bank licences very quickly after taking it to the committee of the central board," Rajan said.

RBI had, over the past 20 years, licensed 12 banks in the private sector in two phases. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licences from the RBI in 2003-04.