Govt Policy

RBI to issue new bank licenses as EC gives its nod

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The Reserve Bank of India is likely to hand out new banking licenses within the next 10-15 days after the Election Commission gave its go ahead for the plan despite elections kicking off in a few days. That will set the stage for some such as India Post Bank, L&T Finance Holdings, Infrastructure Development Finance Co and Janalaxmi Financial Services to get the bank licence and unleash competition.

There are 25 applicants for the license, including Reliance Capital, Aditya Birla, Nuvo and Indiabulls Group. “One can expect in the next 10 to 15 days,” said a spokesperson from the Reserve Bank of India. After weeks of debate, the Election Commission has given the go ahead. “The commission is of the view that the Reserve Bank of India may take necessary action as deemed appropriate by the Bank as permissible under provisions of the RBI Act, 1934 Banking Regulation Act, 1949, and or any other relevant law(s),” the EC said .

RBI will be granting new licenses after more than a decade since it handed out licenses to YES Bank in 2003 and Kotak Mahindra to convert itself into a bank from a non-banking finance company. The central bank has imposed strict capital requirements such as Rs 500 crore capital and put a lot of restrictions on how other group activities could be conducted.This may also be the final one where banking licenses became such a tough issue as the RBI Governor Raghuram Rajan plans to issue licenses on tap and also for differentiated banking.

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