Chidambaram pushes for opening banking sector

Finance minister Palaniappan ChidambaramFinance minister Palaniappan Chidambaram said on Tuesday he saw no reason why companies that fulfil all Reserve Bank of India criteria should be denied banking licences as part of plans to invigorate the country's banking sector.

The RBI is expected to issue final rules on new banking licences to private entities within a few weeks, but many including the International Monetary Fund oppose allowing industrial houses to set up banks, fearing it could lead to misuse of funds.

"The RBI has drawn up draft guidelines, guidelines say that more licences will be given to the private sector ... the governor told me he will give out guidelines in two weeks," Chidambaram told Reuters Television.

"Whether any corporate or any kind of corporate will be excluded I cannot say. But if the guidelines are made out and transparently spelt out and if a corporate satisfies those guidelines, I don't see any reason why a corporate should not be given a licence."

Chidambaram is on a global 'road show' to try and drum up investment in India, particularly in the infrastructure sector. After interacting with businessmen in Hong Kong and Singapore last week, he is now on the European leg of his tour, visiting Germany's financial hub Frankfurt on Monday and London on Tuesday.

According to Reuters, the government believes that the opening the sector will pave the way for the creation of some world-size banks and that deep-pocketed corporates will be able to provide much-needed capital for banks.