The Reserve Bank will issue new bank licences in coming weeks, after seeking approval of the Election Commission, RBI Governor Raghuram Rajan has said while addressing the media after RBI board meeting on Friday which was also attended by the Finance Minister P Chidambaram.
“My sense is, if all goes well we should be able to do it in a few weeks,” said RBI Governor Raghuram Rajan. The RBI is expected to issue only a few bank licences after completing due diligence. Rajan, however, added that the RBI would seek formal approval from the Election Commission before issuing the licences as the model of code conduct is in force. The code came into force on March 5, when the lok Sabha poll schedule was announced.
“look, we have to (seek) the formal approval from the EC that announcing the bank licences will be okay. A number of people have said it will, but it would be best that the process is formally approved by the EC,” he said, adding that the process was started last year and was not a new proposal.
Talking about the economy, Chidambaram said India must achieve “price stability and growth, that is what the people of the country of want and that is what the people of the country deserve.”
He expressed confidence that by “working together” the government and RBI would be able to achieve these targets.
To a query on easing of curbs on gold imports, the Finance Minister said the government would revisit the matter after the final CAD numbers are out. Chidambaram said he made no recommendations to the RBIregarding the bank licences.
“We had appointed the Jalan Committee. The Jalan Committee report is before the RBI. I have not seen the Jalan Committee report. The RBI will take appropriate decisions. If at some stage the Governor wishes to share its contents with me, then I would be very happy to listen. But I don’t intend to speak,” he said. Referring to his meeting with the RBI Board, the minister said he was happy that the Governor acknowledged that the Government through Parliament will set an inflation target and then leave the regulator to find ways and means to achieve it. “I think that is the correct approach. The sovereign has the right to set the target and then the central bank has the mandate to take steps to achieve the target. I think that there is a great degree of convergence on the way to go forward,” Chidambaram added.
To a query on capital infusion in public sector banks, Chidambaram said it is time to “look for new or innovative” ways to raise more capital for the banks. “We are looking at issuing shares to employees. We are looking at rights issue for minority shareholders. There was some discussion about non-voting shares but I think the time has come to look for new or innovative ways to raise more capital for the banks,” he said.
He, however, added that the decision in this regard will be taken by the next government as “that is the appropriate way to go about it.” Rajan said there is a need to create a process for capital raising and it would be worked out over time. “We have to give them (banks) more confidence that they will give adequate returns. We will work out over time. So it is a process.