Bank licences: 4 sectors may be barred

Amid the debate over whether or not to allow corporate houses to enter into the banking sector, the finance ministry is planning to bar industrial houses conducting business in four sectors, including real estate, from seeking banking licences.

“We have prepared a negative list of four sectors that will be barred from entering the banking space. These sectors can manipulate the system because of which we don’t want them to come,” sources in the know told The Indian Express.

The corporates, however, may be allowed to apply for new licences subject to strict riders.

The draft guidelines, which are expected by the end of the week, will be released for consultations after which they would be finalised.

As far as foreign direct investment (FDI) is concerned, the ministry seems to be in agreement with the Reserve Bank of India (RBI), which, on Tuesday, said that FDI will be capped at 49 per cent for new banks.

“If it is 74 per cent then the issue of foreign bank will arise. So, it has to be 49 per cent,” the source said.

The ministry also seems to be more accommodative on the issue of reducing stakes of promoters and shareholders of the new banks. “We are planning to increase the number of years for reducing the stake in banks. The proposal is to raise it to 5 years,” the source added. The RBI has suggested that the promoter holding in the bank could be set at 40 per cent to begin with.

Under the new guidelines, a non-resident would not be allowed to hold more than 5 per cent of the paid-up capital. The minimum paid-up capital could be set at Rs 500 crore, as compared to Rs 300 crore for existing banks.

Earlier in the day, finance minister Pranab Mukherjee said that he will comment on the issue once the guidelines are released. “Let’s see how it (RBI draft guidelines) comes... and thereafter we will make comment,” the finance minister said.

A number of large corporates including the Tatas, M&M, ADAG, AV Birla Group and L&T have expressed interest to enter the banking space in the past. However, there seems to be no clarity on whether aspirants such as Indiabulls, Shriram Finance, Religare and Srei would be allowed into this space.

Source: Financial Express