RBI may allow entry to more new banks than expected: report

The Reserve Bank of India (RBI) is expected to unveil licensing guidelines for new banks that may accommodate more aspirants, reports quoting senior RBI officials said on Monday.

Reports said the new licensees may include non-banking financial companies as well as industrial houses and the number of licences issued may go up to seven or eight against the earlier anticipated four or five.

RBI seems to have decided to increase the number of new licences to be issued after a few rounds of discussions with the finance ministry.

Earlier, in a discussion paper, released in August 2010, RBI had said a ''few'' licences would be given.

The finance ministry is of the view that an increase in the number of players and bank branches that could spread out to remote and secluded areas of the country could help financial inclusion.

"We have received queries from various entities. RBI will be posting on its website all the relevant clarifications with regard to new bank licence guidelines by this month end or early next month so that they get ample time to file applications," a senior RBI official said.

RBI released draft guidelines for new bank licences in February this year, asking the aspirants to submit applications by 1 July 2013.

The banking regulator is now expected to issue clarifications to the aspirants on the 'fit and proper' criteria.

In the final norms, RBI had said an entity would be considered fit to set up banks if it has a track record of sound credentials and integrity, and has been financially sound over the past 10 years.

This had raised concern among some aspirants with cases pending with the Central Bureau of Investigation, Enforcement Directorate, Income Tax Department, etc. Some of these aspirants had sought clarification from the regulator, asking if such pending cases would be a hindrance.

RBI is expected to clarify that such instances would not be a hindrance in applying for banking licences, provided all such cases are disclosed fully.

The list of aspirants for new bank licenses includes most major corporate houses in the country, such as Tatas, Birlas and the Ambanis, besides non-banking financial companies like L&T Finance, M&M Financial Services and the Shriram group.

This is the first time in nearly a decade that the RBI proposed issue of new bank licences after licensing ICICI Bank and HDFC Bank.