No new banking licences till Act is amended: Subbarao

17 Nov 2012

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Reserve Bank of India governor Duvvuri Subbarao Reserve Bank of India governor Duvvuri Subbarao said on Friday that the central bank was ready to launch the process of granting new banking licences, but that new entrants in the sector would be allowed only after the Banking Regulation Act was amended.

A day earlier, finance minister P Chidambaram said he had urged RBI to start the process of finalising norms and receiving applications of prospective entrants in the banking sector in anticipation of a change in the Act. ''We hope that RBI will pick up the thread and finalise the guidelines and start receiving the applications,'' he said.

Apparently, in reply to this, Subbarao said, ''We have been preparing for launching this process, but all the ground work, all the enabling conditions for launching this work have to be fulfilled.''

He said RBI was likely to take eight to nine months to issue the first licence once the process was started. Earlier, RBI had said a committee would be set up to vet the applications of prospective entrants.

The RBI has already made it clear that it wants more powers, such as the right to supersede a bank's board, before it allows new entrants in the sector. During the 30 October credit policy announcement, Subbarao had ruled out any short cuts in issuing new bank licences. ''We believed and we still believe that we need these powers to move forward ... an amendment to the Banking Regulation Act is pending in Parliament for giving us the necessary powers, authority and dispensation to deal with corporates entering the banking sector,'' he had said.

On the sidelines of a conference in Pune on Friday, he said, ''We've been preparing to launch this process but all the groundwork and enabling conditions for launching this work have to be fulfilled.'' In a recent report on the sector, the regulator had said the final norms would be issued only after the Act was amended.

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