Banking Licence norms still some time away as panel to look into RBI draft

NEW DELHI: The announcement of guidelines for new bank licences could be delayed with the government likely to set up a panel to vet the draft entry rules framed by the Reserve Bank. Financial services secretary SK Sharma said on Tuesday that the finance ministry had received the draft guidelines from the banking regulator. "We are currently studying those guidelines and will revert to the banking regulator with our comments," he said, adding that the focus would continue to be financial inclusion.

Sharma, however, refused to give details of the draft guidelines and the time frame for a decision. A finance ministry official told EconomicTimes that any decision would take time. "An expert committee can be set up to vet the guidelines before they become fully operational. Effectively, new licenses will be given by end of 2012," he said. Finance Minister Pranab Mukherjee had said in his budget speech that the Reserve Bank of India was planning to issue the guidelines before the close of the current financial year.

India currently has 27 public-sector banks, seven new private-sector banks, 15 old private-sector banks and 31 foreign banks. The business houses keen on setting up full-fledged banks include both the Reliance groups, Mahindras and Tatas, while those interested among non-banking finance companies are IndiaBulls, Religare and Aditya Birla Financial Services .

The expert committee is likely to comprise of senior government officials, members of important government bodies such as the Prime Minister's Economic Advisory Council, and sector experts. "It has to be looked into how differently new banks can support the whole 'Swabhiman (financial inclusion) Project' . The committee may also look into such issues ," the finance ministry official said.

At present, of the 600,000 habitations in the country, only about 30,000 have a commercial bank branch. The banking regulator had put out a discussion paper 'Entry of New Banks in the Private Sector' in August 2010 inviting comments from banks, non-banking financial institutions, industrial houses and other institutions. In December, it put out the gist of comments received.

Source: EconomicTimes