Banks seek tougher norms for new licence grants

India's banks are clearly none too pleased with the government's decision to grant banking licences to new players, which would increase competition and put their bottomlines under pressure.

After floating a discussion paper on new bank licenses, the Reserve Bank of India held a meeting with the top bankers on Thursday. According to a report, the bankers initially tried to oppose the grant of any new licences at all; but changed their tune when the RBI pointed out that the government has already decided on this.

Finance minister Pranab Mukherjee had announced during in his budget presented in February that fresh banking licences would be issued.

Thereupon, the bankers switched to making suggestions that would result in higher entry barriers.

Almost all the banks were of the view that the minimum capital requirement for new banks should be Rs1,000 crore. At present, the minimum net worth requirement for banks is Rs300 crore.

Bankers also opposed the entry of industrial and business houses on the ground that it can lead to conflict of interest. The bankers pointed out that a potential area for such a conflict could arise in transactions from a bank and its affiliates.