The next round of bank licences is likely to see some corporates get the green signal even as the latter has been facing stiff resistance and a cautious screening by the High level Advisory Committee of RBI led by Bimal Jalan following a general objections against corporates being allowed to operate banks.
"We will see the next round of new banking licences after the elections;" said the newly appointed Secretary for Financial services GS Sandhu. He, however, said that the Bimal Jalan committee is looking at the issues and will give the final verdict. There is a general fear that the corporates running banks are likely to be biased in their lending operations with funding their own parent companies without any proper safeguards.
On April 2, the RBI had announced the 'in principle' clearance of bank licences for two applicants one a financial institution -- IDFC and other a microfiance NGO -- Bandhan Financial Services. This has left out other applicants which are largley corporate houses out of the 27 who had applied originally. However, two applicants like Tata Sons and Videocon ltd had withdrawn their applications thereafter.
With the Election code of conduct already in place, last month the RBI Governor had sought clearnce from the Election Commision, which had led to the delay in granting of the licences.
As many as 25 companies are in the fray for new banking linceces, including top corporate houses like l&T Finance, Reliance Group, Bajaj, Shriram, Religare, Muthoot Finance, Shriram Capitals as well as state run India Post. However, the two applicants who had earlier withdrawn applications or who have been rejected can again reapply.
The RBI agreed to consider the application of India Post in consultation with the Government and advised other applicants to apply afresh after the central bank comes out with new guidelines on granting licences 'on tap.' In the case of the Department of Posts, which had applied for a licence, the HlAC had recommended that it would be desirable for the RBI to consider the application separately in consultation with the Government. This may lead to further delay as the RBI will have to renew its consultation with the new Government which will be formed after May 20.
The RBI has taken a cautious approach in this round of bank licences could as well be categorised as conservative. At a time when there is public concern about governance, and when it comes to licences for entities that are intimately trusted by the Indian public, this may well be the most appropriate stance, RBI holds.
The "in-principle" approval granted for the two applicants is valid for 18 months, during which the applicants have to comply with the requirements under the guidelines and fulfill the other conditions as may be stipulated by the RBI. The RBI has issued bank licences after a gap of a decade. It last awarded licences to Kotak Mahindra Bank and Yes Bank in 2003-04.