RBI issues draft norms for new private banks

In a much-awaited decision expected to boost the financial sector, the Reserve Bank of India (RBI) today released guidelines for licensing new banks in the private sector website for comments from stakeholders like banks, non-banking financial institutions, industrial houses, and others concerned.

The RBI has set 31 October as the deadline for receiving suggestions, after which it will come out with the final guidelines to start the process of creating new private sector banks.

The minimum capital requirement for each bank is pegged at Rs500 crore in the draft guidelines.

According to a Financial Express report, RBI is expected to offer four slots for new banks. Industrial houses and companies having large involvement in real estate and construction won't be granted licences, which will be awarded after the relevant bill is passed by Parliament.

Since liberalisation of the economy began in 1991, the RBI has given licences to 12 private banks in two phases. Ten of these banks were set up on the basis of guidelines issued in January 1993. Two more got licences based on the revised guidelines issued in January 2001.

Norms for new bank licences have been delayed by more than two years. The RBI had originally issued a discussion paper on the entry of new banks in the private sector in August 2010, followed by the draft guidelines for bank licences in August 2011 and then issued a 'gist of comments' on the norms in July this year.